By Rita Nazareth and David Merritt May 26 (Bloomberg) -- Stocks rebounded, after yesterday’s slide drove the MSCI World Index to a nine-month low, while commodities rallied on renewed speculation economic growth is improving. The euro weakened for a third day. The MSCI World, a gauge of equities in 24 developed nations, climbed 1.6 percent at 9:40 a.m. in New York. The Standard & Poor’s 500 Index gained 1.1 percent. Oil advanced above $70 a barrel, while lead and zinc led gains in industrial metals. The euro weakened against all of its 16 most actively traded counterparts. South Korea’s won rebounded as the government pledged to intervene to stabilize the currency amid escalating tensions with the North. Today’s rebound in stocks came after concern the European debt crisis may worsen wiped about $6 trillion from the value of equities so far this month. The Organization for Economic Cooperation and Development raised its growth forecasts for this year and next. Orders for durable goods in the U.S. rose in April for the fourth time in five months, bolstering optimism that manufacturing industries are strengthening. “We’re going to run the table on economics this week,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors, which manages about $400 billion. “Investors realized that maybe they have oversold stocks and we need to begin to rally again to reflect an improved backdrop. From a global perspective, we’d obviously like to see more good news out of Europe. However, we have a very optimistic view on the U.S. economic recovery.” European Rebound The Stoxx 600 rallied 2.6 percent, clawing back yesterday’s 2.5 percent slump, as all 19 industry groups advanced. BHP Billiton Ltd., the world’s biggest mining company, surged 5.1 percent in London and Rio Tinto jumped 6.7 percent. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc helped lead financial shares higher after Credit Suisse Group AG recommended the shares and U.S. Representative Barney Frank said yesterday a proposal to restrict banks’ use of derivatives “goes too far.” This month’s selloff left the Stoxx Europe 600 Index trading at 14 times the reported earnings of its companies, the cheapest valuation since 2008, according to data compiled by Bloomberg. The S&P 500 has tumbled 12 percent from its 19-month high on April 23, leaving it trading at about 15.4 times its companies reported operating earnings, the lowest since July. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks,” Donald Gimbel, senior managing director at Carret Asset Management LLC, told Bloomberg Television. “We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world.” ‘Important Victory’ The S&P 500 climbed today after erasing losses in the final minutes of trading yesterday, wiping out a 3.1 percent drop. The index briefly sank below 1,050 and its 2010 low in February of 1,044 before recovering. The levels are watched by traders and analysts who make investment decisions based on charts. “Yesterday’s reversal, which occurred as equities tested critical support, was an important victory,” Craig Peskin and John Kolovos, co-heads of technical analysis research at Concept Capital in New York, said in a note to clients. “Such key reversals often signal a shift in control from the bears to the bulls.” The 2.9 percent increase in bookings for goods meant to last at least three years was the biggest in three months and followed little change in March, figures from the U.S. Commerce Department showed. Orders excluding transportation unexpectedly fell after revisions showed even bigger increases in prior months. Economy Watch The number of mortgage applications in the U.S. rose last week by the most in a month as homeowners took advantage of borrowing costs close to a record low to refinance, the Mortgage Bankers Association said today. New home sales may have climbed to an annual rate of 425,000 last month, the most since September 2008, economists said before the report, also from the Commerce Department, set for 10 a.m. The economy of the OECD’s 30 members will grow 2.7 percent this year, more than the 1.9 percent predicted in November, the Paris-based group said today in a report. Including non-members such as China, the global economy will expand 4.6 percent this year and 4.5 percent in 2011, compared with an average of 3.7 percent during the decade through 2006. Emerging Markets The MSCI Emerging Markets Index climbed 2.7 percent. The MSCI China Index of Hong Kong-traded shares advanced 2.5 percent, while Indonesia’s Jakarta Composite Index surged 7.3 percent as PT Astra International jumped 10 percent on its prediction for record motorcycle sales this year. The Micex Index in Russia, the world’s largest energy exporter, climbed 3.5 percent and the ruble strengthened 0.9 percent against the dollar. Oil in London rose 1.9 percent to $70.86 a barrel after its longest losing streak since September 2008. Zinc for delivery in three months jumped 2.3 percent to $1,898 a metric ton on the London Metal Exchange, while lead added 2.3 percent to $1,785 a ton. Copper, aluminum and nickel also gained. The euro declined 0.6 percent to $1.2272, and weakened 0.6 percent against the yen, to 110.73. The 16-nation currency depreciated to 108.84 yen yesterday, the lowest level since November 2001. The won was at 1,252.28 against the dollar, from 1,251.10 yesterday, when it touched 1,277.85, the weakest since July 16. Herd Behavior “Authorities will supply sufficient foreign currency liquidity if needed,” South Korean Vice Finance Minister Yim Jong Yong said at an emergency meeting of officials from the Finance Ministry, central bank, Economy Ministry and financial watchdog in Gwacheon today. “We will be closely watching for herd behavior in the currency market and take necessary actions in a prompt and active manner.” Treasuries declined, sending the yield on the 10-year note up four basis points to 3.22 percent, according to BGCantor Market Data. The U.S. sells $40 billion of five-year securities today, the second of three auctions this week totaling $113 billion. The yield on the German 10-year bund increased six basis points to 2.64 percent. Germany issues five-year notes today, with Portugal and Italy also selling debt. The rate banks say they pay for three-month loans in dollars climbed for a 12th straight day. The London interbank offered rate, or Libor, for such loans advanced to 0.538 percent today, according to the British Bankers’ Association. The rate was 0.536 percent yesterday, the highest level since July 7, data from the British Bankers’ Association show. The cost of protecting against a default on European corporate bonds fell from a 10-month high, with credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly junk- rated companies declining 33.7 basis points to 590.58, according to Markit Group Ltd. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

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