Overseas Markets Barely Trend Higher With the Leaders Being Oslo, Milan, and the Shanghai Composite

While markets are up the gains seem unimpressive

March 19 (Bloomberg) — Stocks climbed, sending the MSCI World Index to the longest stretch of gains since 2006, as the Federal Reserve said it will buy $300 billion of government bonds to combat the first global recession since World War II.

The MSCI World advanced for an eighth day, led by banks and raw-material producers, the past year’s worst performers. Standard & Poor’s 500 Index futures fell after U.S. stocks closed at a one-month high yesterday as some investors questioned whether the Fed’s efforts will end the economic contraction. European government bonds soared, while U.S. Treasury notes advanced after surging the most in more than four decades yesterday. Copper, oil, wheat and soybeans rallied.

“We’re unsure if this is a sucker’s rally,” said Staffan Sevon, chief investment officer at Nordea Asset Management in Helsinki, which has $231 billion. “The Fed is doing the right thing. Even though it is probable this will end well and we won’t be living in the forest eating berries, there will be enough nasty surprises to scare the market.”

The MSCI World added 1.6 percent at 10:09 a.m. in London as UBS AG led a rally in banks, Xstrata Plc advanced with metals, and Hermes International SCA and Prudential Plc climbed on profit that beat analysts’ estimates.

The gauge of 23 developed countries has surged 16 percent since March 9 as Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said they made money during the first two months of 2009 and the Fed signaled its determination to avoid a repeat of the Great Depression.

Futures on the S&P 500 slipped 0.5 percent after yesterday’s rally cut its 2009 drop to 12 percent from as much as 25 percent on March 9. The Fed will use newly created money to fund the purchases, increasing the supply of funds in the market and helping to drive down rates.

‘Key Foundations’

The Fed’s move “is very much one of the key foundations for eventual recovery,” Jeremy Batstone-Carr, an equities analyst at Charles Stanley & Co. in London, said in a Bloomberg Television interview. “This is an important step. We need to see further action taken in Europe. This is another piece in the jigsaw.”

Europe’s Dow Jones Stoxx 600 Index gained for the first time in three days, adding 0.8 percent. The MSCI Asia Pacific Index rose for a fifth day, climbing 2.1 percent. Mitsubishi UFJ Financial Group Ltd., Japan’s biggest publicly traded lender, increased in Tokyo, where the central bank said it will buy more bonds from banks.

UBS, European Banks

UBS, the European bank hardest hit by the credit crisis, added 7.5 percent to 12.69 Swiss francs, extending its eight-day gain to 48 percent. Switzerland’s biggest bank offered to buy back 1 billion euros ($1.34 billion) in debt to boost capital adequacy and said it will seek authority from shareholders to raise capital in the future if needed.

Bank of Ireland Plc jumped 18 percent to 42 euro cents. Allied Irish Banks Plc advanced 12 percent to 58 cents. Ireland has been advised to set up a “toxic debt” company to take over souring property loans from the country’s banks, the Irish Independent said, without saying where it got the information.

Xstrata, which produces copper and is the world’s biggest exporter of power station coal, gained 10 percent to 419 pence. StatoilHydro ASA, the largest offshore oil and natural-gas operator, added 3.3 percent to 118.1 kroner.

Copper for three-month delivery advanced as much as 3.3 percent to $3,880 a metric ton on the London Metal Exchange. Crude oil for April delivery rose as much 3.5 percent to $49.83 a barrel, nearing $50 for the first time in two months.

Soybeans, Wheat

Corn, soybeans and wheat gained on an outlook for increased demand for U.S. crops. May-delivery wheat advanced as much as 2.5 percent to $5.4325 a bushel. Soybeans for May delivery rose as much as 3 percent to $9.42 a bushel.

Hermes rose 5.3 percent to 75.72 euros. The company reported 2008 net income of 290.2 million euros ($390 million), beating the average analyst estimate of 287.5 million euros.

Prudential advanced 11 percent to 280 pence. The U.K.’s second-largest insurer said Chief Executive Officer Mark Tucker will step down as the company posted operating profit that beat analysts’ forecasts.

Mitsubishi UFJ rose 2.3 percent to 489 yen. Mizuho Financial Group Ltd., Japan’s second-biggest lender, gained 1.5 percent to 209 yen.

The Bank of Japan said yesterday it will buy 1.8 trillion yen ($18.3 billion) of government debt from banks each month, up from 1.4 trillion. The central bank said on March 17 that it may provide as much as 1 trillion yen in subordinated loans to banks.

Treasuries, Yen

The yield on the 10-year Treasury note fell three basis points to 2.51 percent after sliding 47 basis points yesterday on the Fed’s announcement. The yield on the 10-year German bund, Europe’s benchmark government security, slid as much as 22 basis points to 3 percent.

The yen rose to a three-week high versus the dollar, after gaining the most since December yesterday, as speculation the U.S. and Europe are committed to keeping down yields boosted the appeal of Japanese assets.

The dollar’s drop, which reduces the profitability of revenue generated abroad for Japan’s exporters, help push Japan’s Nikkei 225 Stock Average down 0.3 percent.

Toyota Motor Corp., which gets 37 percent of sales from North America, lost 2.2 percent to 2,965 yen. Honda Motor Corp. slumped 3 percent to 2,230 yen.