Oct. 6 (Bloomberg) -- European and Asian stocks gained as higher commodities lifted metal producers, while financial shares advanced after BofA Merrill Lynch Global Research recommended European banks. BHP Billiton Ltd., the world’s biggest mining company, climbed for a second day as copper increased. Credit Agricole SA, France’s third-largest bank by market value, advanced 3.5 percent after BofA Merrill advised buying the stock. Societe Generale SA, the country’s second-biggest bank, fluctuated after saying it aims to raise 4.8 billion euros ($7.1 billion) and is in talks to purchase Dexia SA’s 20 percent stake in Credit du Nord. Dexia added 2.6 percent. Europe’s Dow Jones Stoxx 600 Index gained 0.7 percent to 237.82 at 9:34 a.m. in London, while futures on the Standard & Poor’s 500 Index rose 0.4 percent. The benchmark gauges for Europe and the U.S. rebounded yesterday as a report showed American service industries returned to growth after 11 months of contraction. “If banks are doing well, that’s good news for the rest of the market,” said Kilian de Kertanguy, a fund manager at Cholet-Dupont Gestion SA in Paris, which oversees about $2.3 billion. “There are signs that the market is ready to return to its highs. Each time there is a decline, we see that there are buyers and liquidity out there ready to enter.” U.K. Manufacturing Slides European shares pared gains after U.K. manufacturing production unexpectedly slumped in August to the lowest level since 1992. Factory output dropped 1.9 percent from the previous month, the Office for National Statistics said. Economists had predicted a 0.3 percent increase, according to the median of 26 forecasts in a Bloomberg News survey. Stocks had dropped for two weeks as data on U.S. unemployment, manufacturing and consumer confidence missed economists’ forecasts, fueling concern that the global economic recovery may not be robust. The MSCI Asia Pacific Index advanced for the first time in four days today, adding 1.4 percent. Shares in Australia pared earlier gains as the country’s central bank unexpectedly raised its benchmark interest rate from a 49-year low, becoming the first Group of 20 nation to boost borrowing costs since the start of the global financial crisis more than a year ago. BHP added 1.7 percent to 1,686.5 pence in London, while Rio Tinto Group, the world’s third-biggest mining company, gained 2.6 percent to 2,630.5. Copper, lead, nickel and tin advanced on the London Metal Exchange. Banks Gain A gauge of European banks climbed 1.9 percent, the second- biggest advance among 19 industry groups in the Stoxx 600, after BofA Merrill upgraded the industry to “overweight,” saying “with further EPS upgrades ahead reasonable valuations offer the potential for re-rating.” Credit Agricole advanced 3.5 percent to 14.20 euros. The French bank was raised to “buy” from “neutral” at BofA Merrill, which said the stock “is the purest vehicle to play the benefits of expanding retail margins in France.” Royal Bank of Scotland Group Plc, the biggest government- controlled bank in Britain, gained 2.1 percent to 49.60 pence as a report by Halifax showed U.K. house prices rose 1.6 percent in September from the month before. Societe Generale gained as much as 2.3 percent to 53.41 euros and lost as much as 3.1 percent. The lender said it will repay 3.4 billion euros to the government with its second rights offer in less than two years. Shareholders can buy two new shares for every nine held at 36 euros each, or 31 percent less than yesterday’s closing price. Dexia Stake The French lender is also in discussions to buy Dexia’s stake in Credit du Nord, a French retail bank it controls, and aims to conclude the talks by the end of the year. Dexia gained 3 percent to 6.12 euros. The European luxury-goods industry was upgraded to “neutral” from “bearish” at Nomura Holdings Inc., which said “although the decline in luxury sales has been particularly pronounced and sudden, trends appear to be stabilizing.” The brokerage lifted Adidas AG to “buy” from “reduce.” Adidas, the world’s second-largest sporting-goods maker, added 2.4 percent to 35.89 euros. Tesco slipped 1.1 percent to 387.2 pence. The world’s third-biggest retailer reported the weakest first-half profit growth in 11 years after acquisitions added to financing costs and units from the Czech Republic to Ireland withered in the recession. Net income rose 1.3 percent to 1.03 billion pounds ($1.64 billion), compared with analysts’ estimates for profit on that basis of 1.04 billion pounds. Earnings Season Alcoa Inc. kicks off the U.S. third-quarter earnings season tomorrow, while companies including Banco Espanol de Credito SA and J Sainsbury Plc report in Europe this week. Nobel Prize-winning economist Joseph Stiglitz said U.S. unemployment will keep rising and should be the focus for policy makers, and gains in the stock market show investors have been “irrationally exuberant” about a recovery. “There’s a lot of risk going ahead of some big bumps,” he said yesterday in a Bloomberg Television interview from Istanbul, citing housing, commercial real estate and consumers’ inability to pay off credit cards because of job losses. “There’s a very big risk that markets have been irrationally exuberant.” To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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