Stocks: Wednesday’s review

Asian stocks dropped, led by exporters, as a downgrade of Italy’s credit rating overshadowed signs that Europe may reach consensus on measures to shield its banks from the sovereign-debt crisis. 

Japan’s Nikkei 225 (NKY) Stock Average fell 0.9 percent. South Korea’s Kospi Index slumped 2.3 percent. Australia’s S&P/ASX 200 advanced 1.4 percent. The Hong Kong stock exchange is closed today for a public holiday.

Nikkei 225 8,383 -73.14 -0.86%, Hang Seng 16,250 -571.88 -3.40%, S&P/ASX 200 3,926 +54.38 +1.40%, Shanghai Composite 2,359   -6.12 -0.26%.

Toyota Motor Corp. the world’s biggest carmaker, fell 2 percent in Tokyo. Japanese utilities slumped on speculation the government will change the framework for pricing electricity. BHP Billiton Ltd., the largest mining company, gained 3.8 percent in Sydney as commodity prices rallied after the Financial Times reported Europe is nearing a plan to recapitalize its banks.

European stocks advanced for the first time in four days amid speculation policy makers are examining measures to shield banks from the region’s sovereign- debt crisis.

Benchmark indexes rose in all 18 western European markets, with the exception of Iceland. The DAX climbed 4.9 percent in Frankfurt. France’s CAC 40 rose 4.3 percent and the U.K.’s FTSE 100 advanced 3.2 percent.

FTSE 100 5,102 +157.73 +3.19%, CAC 40 2,974 +123.35 +4.33%, DAX 5,473 +256.32 +4.91%

Dexia SA snapped a four-day plunge after France and Belgium said a “bad bank” will be set up to hold its troubled assets. BNP Paribas SA and Societe Generale SA, France’s biggest lenders, climbed more than 8 percent. Rio Tinto Group led mining companies higher. European Aeronautic, Defence & Space Co. rose 5.7 percent after saying 2011 will be a “very good” year.

U.S. stocks rallied, sending the Standard & Poor’s 500 Index to its biggest two-day gain in more than a month, as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis.

Dow 10,936.62 +127.91 +1.18%, Nasdaq 2,461 +55.69 +2.32%, S&P 500 1,144 +20.09 +1.79%

The S&P 500 advanced 1.8 percent to 1,143.87 at 4 p.m. New York time, according to preliminary closing data. The index has climbed 4.1 percent in two days, the most since Aug. 29.

Monsanto Co., the world’s largest seed company, rallied 4.7 percent after forecasting higher-than-expected profit. Halliburton Co. gained 6.1 percent, pacing gains in energy producers, as oil rose after the U.S. Energy Department reported an unexpected decline in inventories. Walt Disney Co.  advanced 5.5 percent as Citigroup Inc. raised its recommendation for the shares.