US Fed balm for markets

GLOBAL MARKETS

Asian stocks rebounded from an eight-week low after the Federal Reserve said the US economy will probably weather subprime mortgage defaults that sparked a $2.65 trillion sell-off in equities worldwide.

Mitsubishi UFJ Financial Group, Japan's largest bank, led gains by financial shares that had dropped on concern that a crunch in the credit market sparked by the subprime rout in the US would drag on earnings. Samsung Electronics and Toyota Motor rose on speculation that spending in the US, the region's biggest export market, will be sustained.

The Fed's comments "had a calming effect on the market, that the subprime issue is not a death knell for the US economy and the global environment is still strong,'' said Hans Kunnen, who helps manage the equivalent of $117 billion at Colonial First State Global Asset Management in Sydney.

Higher profits lifted shares at Daikin Industries, Japan's biggest maker of air conditioners, and Pacific Basin Shipping, an operator of dry-bulk cargo ships. Hyundai Merchant Marine climbed after the two Koreas announced their leaders will meet for the first time in seven years.

Europe

European stocks rose for a second day after the Federal Reserve in the US left interest rates unchanged and said the world's biggest economy will probably weather the rout in the mortgage market.

ING Groep, the largest Dutch financial-services company, and Adidas, the world's No 2 sporting-goods maker, climbed after the companies reported second-quarter profit that beat analysts' estimates. Carlsberg rose after the Danish brewer of Tuborg and Baltika increased its earnings outlook.

The Dow Jones Stoxx 600 Index added 0.8 per cent to 376.42 in London. The Stoxx 50 climbed 0.6 per cent, while the Euro Stoxx 50, a measure for the euro region, rose 0.7 per cent.

US

US stock-index futures rose on speculation that earnings will continue to grow after Cisco Systems, the largest maker of computer-networking equipment, forecast higher sales than analysts estimated.

Cisco shares climbed in Europe. Priceline.com gained after the online travel agency boosted its forecast for full-year earnings. Warner Music Group advanced after Citigroup recommended buying shares of the recording company of Madonna and Metallica. American International Group, the world's biggest insurer, gained before reporting earnings.

"Positive surprises like Cisco's will support sentiment for equities,'' said Gerold Kuehne, who helps manage a $200 million US equity fund at Liechtensteinische Landesbank in Vaduz, Liechtenstein. "Markets are still shaky but on the way to stabilizing.''

Standard & Poor's 500 Index futures expiring in September advanced 2.4 to 1,484.8 in London. Dow Jones Industrial Average futures increased 20 to 13,568. Nasdaq-100 Index futures added 5.25 to 1,979.25.

At least 10 members of the S&P 500 are expected to report quarterly results today. Profit at the 434 companies that posted earnings so far rose 11.1 percent, on average. At the end of March, analysts expected 3.2 percent growth for the second quarter.