July 1 (Bloomberg) -- European stocks and U.S. index futures rose while the yen fell after an expansion in Chinese manufacturing indicated that economies are recovering from the worst global slump since World War II. Oil and copper gained. The MSCI World Index added 0.3 percent at 12:15 p.m. in London after the gauge of 23 developed countries yesterday capped its biggest quarterly advance in a decade. Standard & Poor’s 500 Index futures gained 0.5 percent, and emerging-market stocks rose to a two-week high. The yen weakened 0.7 percent against the euro. Crude jumped 1.6 percent to $71 a barrel on the New York Mercantile Exchange and copper advanced 2 percent to $5,065 a metric ton on the London Metal Exchange. Speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the recession helped send the MSCI World to a 20 percent gain last quarter. China’s Purchasing Managers’ Index climbed for a fourth month in June, the latest sign the country’s 4-trillion yuan ($585 billion) stimulus is reviving the world’s third-largest economy. European retailers rallied as Marks & Spencer Group Plc reported its smallest quarterly sales decline in almost two years. “Risk sentiment has been bolstered,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote today in a note. Improving economic data will drive “an extension of the risk-asset rally to the detriment of traditional funding currencies such as the yen.” M&S, Carrefour The Dow Jones Stoxx 600 Index of European shares climbed 1.1 percent as Marks & Spencer and Carrefour SA led gains in retailers and the Chinese manufacturing report lifted raw- material producers. China is the world’s second-biggest exporter, ranking behind Germany in 2008, according to the World Trade Organization. Marks & Spencer increased 4.6 percent. The London-based store chain reported a smaller sales decline as promotions and warmer weather boosted purchases of summer fashions and food. Carrefour, Europe’s largest retailer, gained 4.9 percent. The Paris-based company announced a three-year plan to cut 4.5 billion euros ($6.3 billion) in costs. A gauge of European basic-resource producers added 2.8 percent for the biggest gain among 19 industry groups in the Stoxx 600. London-based Rio Tinto Group, the world’s third- biggest mining company, advanced 2.7 percent. German Banks Commerzbank AG, Germany’s second-biggest bank, surged 14 percent for the steepest rally in the Stoxx 600. A possible German plan to set up a so-called bad bank may have “significant impact” on shares of Frankfurt-based Commerzbank and Deutsche Postbank AG, London-based Morgan Stanley analyst Ronny Rehn wrote in a report dated yesterday. Bonn-based Deutsche Postbank increased 5.5 percent. The MSCI Emerging Markets Index added 1 percent, with China’s Shanghai Composite Index closing above 3,000 for the first time in a year. Russia’s Micex Index climbed 1.8 percent. The International Monetary Fund’s board of directors may approve authorization to issue as much as $150 billion of bonds for the first time as it seeks new sources of funds, an IMF official said. The bonds are part of a wider effort to seek funding as the lender helps countries from Iceland to Pakistan combat the global financial crisis. European Manufacturing A gauge of manufacturing in the 16-nation euro region rose to 42.6, the highest since September, Markit Economics said today. Manufacturing in the U.S. probably shrank in June at the slowest pace in 10 months, another sign the worst of the recession may be over, the Tempe, Arizona-based Institute for Supply Management is forecast to say at 10 a.m. New York time. Other U.S. reports today may show companies cut fewer jobs in June, pending home resales steadied in May after three consecutive gains and spending on construction projects dropped in May for the first time in three months. The yen declined against 14 of the 16 most-traded currencies, falling as low as 136.45 per euro, its weakest level since June 15. Japan’s Tankan survey, a gauge of sentiment among the country’s largest manufacturers, rose to minus 48 in June, short of the minus 43 reading forecast in a Bloomberg survey. “The Tankan survey suggests that the Japanese economy remains in the doldrums, dimming prospects for the yen,” a team of Citigroup Inc. currency analysts, including New York-based Todd Elmer, wrote in a research report today. Default Swaps The cost of protecting European corporate bonds in the credit-default swap market fell for a fourth day. Contracts on the high-yield Markit iTraxx Crossover Index slid 12 basis points to 704, according to JPMorgan Chase & Co., signaling an improvement in perceptions of credit quality. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Credit and stock markets have rebounded as signs increased that the global economy and corporate profits are recovering after the collapse of subprime mortgages spurred almost $1.5 trillion in losses and writedowns at financial firms. The Libor-OIS spread, which measures banks’ willingness to lend, has narrowed to 37 basis points, from a record 364 basis points reached in October following the collapse of New York based Lehman Brothers Holdings Inc. Analysts covering S&P 500 companies began to boost 2009 profit estimates for the first time this year in May as economists predicted the U.S. economy will start to expand this quarter, weekly data compiled by Bloomberg show.

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