Aug. 18 (Bloomberg) -- European stocks and U.S. futuresadvanced and industrial metals gained as German investorconfidence improved more than forecast and on speculation agovernment report will show U.S. housing starts climbed.

The MSCI World Index of 23 developed nations added 0.4percent at 10:03 a.m. in London, rebounding from its biggestretreat since April. Futures on the Standard & Poor’s 500 Indexgained 0.8 percent. Copper added 1.9 percent and aluminum rose4.1 percent on the London Metal Exchange after a two-day drop.The yen fell against all 16 most-traded currencies tracked byBloomberg, while the dollar declined against every one exceptthe yen and the Brazilian real.

The ZEW Center for European Economic Research said itsindex of investor and analyst expectations rose to 56.1 inAugust from 39.5 in July, exceeding the median forecast in aBloomberg News survey for a reading of 45. U.S. builders in Julyprobably broke ground on homes at the fastest pace in eightmonths, analysts said before a report scheduled for 8:30 a.m. inWashington. Stocks and commodities plunged yesterday onspeculation that a rally in riskier assets had outpaced theprospects for economic growth.

“There is still much to be optimistic about for the secondhalf of the year,” said Bill O’Neill, the London-basedstrategist at Merrill Lynch Global Wealth Management, which has$1.1 trillion in assets. “This ‘two steps forward, one stepback’ pattern is typical of phases covering the end of arecession.”

Rebound in Europe

The Dow Jones Stoxx 600 Index of European shares added 1percent, recovering from the biggest one-day drop since July 2,as raw-material producers gained with metals. A 43 percentrebound since March 9 has left the regional measure valued at40.2 times the profits of its companies, near the most expensivesince 2003, weekly data compiled by Bloomberg show.

Rio Tinto Group, the world’s third-biggest mining company,gained 4 percent in London, while BHP Billiton Ltd., the largest,added 1.9 percent.

HSBC Holdings Plc rose 2.4 percent. Europe’s biggest bankwas raised to “buy” from “neutral” at Goldman Sachs GroupInc., which said provisions and losses at HSBC may decline.

Copper for delivery in three months rose 1.8 percent to$6,161.50 a metric ton on the LME. The average U.S. homecontains 440 pounds (0.2 ton) of copper, according to the CopperDevelopment Association. Crude oil advanced 1.1 percent to$67.50 a barrel in New York. Gold added 0.5 percent to $939.47an ounce.

Emerging Markets

Emerging-market stocks rose from a four-week low and bondssnapped a six-day losing streak.

The MSCI Emerging Markets Index added 0.4 percent to 823.03after dropping the most in 5 1/2 months yesterday. Bonds rose,pushing the extra yield investors demand to own developingnations’ debt instead of U.S. Treasuries down 3 basis points to3.8 percentage points., according to JPMorgan Chase & Co.’sEMBI+ Index. The decline snaps six days of increases, thelongest streak since November.

The Micex index of stocks in Russia, the world’s biggestenergy-exporting economy, added 1.6 percent and the rublestrengthened 1.3 percent to 31.8853 per dollar as oil advanced.

The Shanghai Composite Index increased 1.4 percent, themost two weeks. Poland’s WIG20 benchmark added as much as 1.3percent to a three-day high after the country’s equities wereraised to “overweight” from “equal weight” by Morgan Stanley.

Treasuries declined, sending the yield on the benchmark 10-year note up 5 basis points to 3.52 percent. The 30-year yieldincreased 3 basis points to 4.36 percent.

The yen dropped most against the South African rand,weakening 2.2 percent, and fell 1 percent against the euro, amidrevived demand for higher-yielding currencies. The poundadvanced 0.6 percent against the dollar after the Office forNational Statistics said the U.K. inflation rate remained at 1.8percent in July, confounding economists’ forecasts for a decline.

To contact the reporter on this story:Stuart Wallace in London atswallace6@bloomberg.net