LONDON: Stocks rose modestly in Europe and Asia on Monday, as some investors wagered that the worst of the credit crisis was over. Oil prices neared $120 a barrel amid expectations that inflation would remain high.

Credit Suisse Group and Lloyds TSB Group gained in Europe after JPMorgan Chase wrote in a report that the worst of the write-downs might be over for European banks. Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group surged in Tokyo. Wm. Wrigley Jr. jumped in Germany after The New York Times reported that Mars and Warren Buffetts Berkshire Hathaway were close to buying the company. StatoilHydro led European energy-related shares higher.

“People are beginning to sense that we are coming towards the endgame,” Stephen Pope, chief global strategist at Cantor Fitzgerald in London, said. If you agree that we are through the worst, “then banks are not such a bad place to go into,” he said.

In afternoon trading, the FTSE 100 index was up 0.6 percent, while the DJ Euro Stoxx 50 index, a barometer of euro zone blue chips, was up 0.8 percent. The CAC 40 in Paris was up 1 percent, while the DAX in Frankfurt was up 0.8 percent.

The MSCI world index added 0.4 percent to 1,521.2 . The index has rebounded, paring this years declines to 4.2 percent, on speculation banks are recovering after $309 billion in writedowns. Futures on the Standard Poors 500 index added 0.5 percent, suggesting a stronger opening Monday on Wall Street.

The MSCI Asia Pacific Index increased 0.8 percent, as the Tokyo benchmark Nikkei 225 stock average gained 0.2 percent, the Hang Seng index in Hong Kong rose 0.6 percent, and the SP/ASX 200 index in Sydney rose 0.3 percent.

Stocks rallied last week in the U.S. and Europe after companies from Boeing to Ericsson and Bayer reported earnings that beat analysts estimates. Financial shares in the SP 500 climbed Friday to their highest since February after profit at American Express topped estimates.

As of Friday, 60.5 percent of companies in the SP 500 reported positive surprises, according to data compiled by Bloomberg. In Europe, analysts now predict earnings will be little changed this year for companies in the Stoxx 600, based on data compiled by Bloomberg. That compares with a 0.5 decline forecast the previous week.

Credit Suisse, Switzerlands second-biggest bank, added 3.6 percent. Commerzbank, Germanys second-largest bank, gained 2.4 percent.

The Commerzbank chief executive, Klaus-Peter Mueller, said Monday that the financial turbulence from the collapse of the U.S. subprime market might calm by mid-year.

“The worst of the markdowns seems to be over,” JPMorgan analysts, including London-based Kian Abouhossein wrote in a note. Banks in Europe excluding Britain will write down about \6.8 billion, or $10.6 billion, before taxes this year after the value of credit assets fell, according to JPMorgan. That is down from a previous forecast of \8.3 billion, based on the report.

JPMorgan is “on the optimistic side,” said Stephen Thornber, fund manager at Threadneedle Asset Management in London. “I may be a little bit more cautious. It is probably a little bit too early to say that we are through the worst.”

Mitsubishi UFJ, Japans largest publicly traded bank, gained 8.9 percent. Mizuho Financial, the No. 2 bank by revenue, jumped 7.5 percent.

Wrigley surged $12.74 to $75.19 in Germany. Mars and Berkshire Hathaway may be close to buying the maker of Doublemint gum for more than $22 billion in a deal that would combine two of the biggest U.S. candy makers, The New York Times and Wall Street Journal reported, citing unidentified people familiar with the matter.

StatoilHydro, Norways largest oil and gas company, climbed 3.6 percent. Saipem, Europes biggest oilfield-services contractor by market value, rallied 3.5 percent.

U.S. crude oil for June delivery rose as much as 1.2 percent to $119.93 a barrel after BP shut a North Sea pipeline and gunmen attacked police guarding Nigerias largest oil and gas terminal.

(04-28) 00:56 PDT WASHINGTON, (AP) —

Battling risky economic crosscurrents, the Federal Reserve is ready to bump down a key interest rate again to brace the wobbly economy. That rate cut could turn out to be the last one for a while as zooming energy and food prices heighten inflation concerns.

Fed Chairman Ben Bernanke and his colleagues are walking a tightrope. They are trying to shore up economic growth and at the same time they are mindful that they can’t let inflation get out of hand. It’s a bit of an economic dilemma: The very rate reductions the Fed depends on to energize the economy can also sow the seeds of inflation down the road.

“It’s a very challenging environment,” said John Silvia, chief economist at Wachovia.

In a nod to those conflicting forces, the Fed probably will opt for a moderate-sized rate reduction of one-quarter percentage point this week, Silvia and other economists predict.

At its previous meeting on March 18, the Fed slashed rates by a hefty three-quarters point. The action, however, drew opposition from two Fed members who favored a smaller reduction because of concerns about a potential inflation flare-up. It was a crack in the mostly unified front the Fed often shows the public.

The Fed, which has been cutting rates since last September, turned more forceful in January and March, when housing, credit and financial problems took a turn for the worse, threatening to plunge the country into a deep recession. The Fed’s rate cuts in January and March alone marked the most aggressive Fed intervention in a quarter-century.

This time around, though, the Fed is likely to go with a smaller rate cut at the end of its two-day meeting on Wednesday.

A quarter-point reduction would drop the Fed’s key rate for influencing national economic activity to 2 percent. This rate, called the federal funds rate, is what banks charge each other on overnight loans and affects a wide range of interest rates charged to people and businesses.

In turn, the prime lending rate for millions of consumers and businesses would fall by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates would be the lowest since late 2004.

Economists think the Fed may be inclined to leave rates at such low levels possibly through the rest of this year and maybe into next year Д as long as the country is not hit with another blow to economic growth.

“We are entering the stage where it is time for the Fed to wind down and move to the sidelines,” said Greg McBride, senior financial analyst at Bankrate.com. “A quarter-point reduction is a nice segue to that transition. Short-term interest rates could stay low longer than many currently expect,” he added.

The Fed’s rate cuts Д which take months to work their way through the economy and affect activity Д along with the government’s $168 billion stimulus package of tax rebates for people and tax breaks for businesses Д should help strengthen the economy in the second half of this year, Fed officials said.

It’s the first half of this year where damage from the housing, credit and financial debacles could be the worst. The economy may grow little, if at all, during this period and could actually shrink, Bernanke told Congress earlier this month. A recession, he said, was possible. It was Bernanke’s first public acknowledgment of such a scenario.

A growing number of economists now believe the economy probably will contract in the current April-to-June quarter. Many analysts also now think the economy will manage to eke out a barely noticeable 0.4 percent growth rate during the first three months of this year as opposed to falling into negative territory as some had previously thought. The government reports on the first quarter’s performance on Wednesday Д the same day the Fed’s decides its next move on interest rates.

Even if the economy heals in the second half of this year and into 2009, the unemployment rate, now at 5.1 percent, is likely to rise, perhaps reaching close to 6 percent early next year, analysts said. Job losses for the first three months of this year neared the staggering quarter-million mark.

The Fed’s rate cuts ordered thus far would help to cushion the fallout.

On inflation, Bernanke said rising prices are a source of concern and must be monitored closely. Still, he is hopeful inflation will moderate in coming quarters.

Gasoline prices have shot up to record highs in recent days and could hit $4 a gallon this summer. Food prices are up 5.3 percent on an annualized basis in the first three months of this year, outpacing the 3.1 percent rise in overall inflation.

If the Fed does drop its key rate to 2 percent and holds it there for some time, that would still be low enough to provide relief to stressed homeowners facing a rate reset to their adjustable-rate mortgages, McBride said.

Trying to get the economy back to full throttle after its last recession in 2001, the Fed ratcheted down its key rate to 1 percent Д the lowest in more than four decades. Then-chairman Alan Greenspan held the rate at that super-low level for a year, before the Fed began to bump it up. That action has since fueled criticism that Greenspan helped to create the very housing boom that has now gone bust, wreaking havoc on the economy. Foreclosures have surged to record highs, financial companies have wracked up multibillion losses and all the fallout has sent the economy reeling.

Even as economists predict the Fed is likely to wind down its rate-cutting campaign this year, they said the Fed would lower rates again if there were worrisome signs that the economy was faltering even more than expected.

“If the news is unremittingly bad, it will go down again. So the Fed has got plenty of ammunition if its needs it. But my guess is this will be about it,” said Bill Cheney, chief economist at John Hancock Financial Services.

California is poised to become the first state in the country to require electronic tracking for prescription drugs as part of an effort to combat the $40 billion global counterfeit drug trafficking trade.

But the law, scheduled to take effect in 2009, might be delayed until 2011 to allow the drug industry more time to get the computer systems it needs to track individual bottles of drugs as they move through the supply chain.

The California Board of Pharmacy is scheduled to meet today in San Diego to discuss the postponement, which would mark the second delay for the 2004 law.

“I think (the law) is a good idea, but I don’t think the actual practicalities were well thought out,” said Dr. Bryan Liang, director of the Center for Patient Safety at the medical school at UC San Diego.

Fake prescription drugs, along with diluted or expired medications, are a growing problem in the U.S. drug distribution system. The number of counterfeit drug cases investigated by the U.S. Food and Drug Administration increased nearly tenfold from 2000 to 2004.

A complex drug supply chain involving a maze of wholesalers and secondary wholesale markets has made it relatively easy for careless or unscrupulous sellers to introduce bogus drugs of questionable makeup. Those drugs have been found at pharmacies, retailers and health providers.

Authorities often have a difficult time pinpointing when counterfeit products were introduced into the chain because transactions are not tracked.

The law requires that each bottle of prescription drugs be assigned a unique serial number. Everybody who transfers the drug - from manufacturer to wholesaler to pharmacist - would have to record that fact by adding to the drug’s electronic record, or e-pedigree. Suspect drugs would be embargoed. The law was enacted by the state Legislature in response to strong public pressure to prevent counterfeit drugs from reaching the legitimate marketplace.

“It’s the diversion of wholesale drugs that (allows) the easy introduction of counterfeits into the legitimate drug supply,” said Jim Dahl, former assistant director of the FDA’s Office of Criminal Investigations.

No other state requires drugs to be tracked electronically, although Florida requires that drugs be tracked. Federal regulations to track drugs are on hold. But in 2009, it will become illegal in California for wholesalers or pharmacists to buy or sell bottles of drugs that don’t have serial numbers.

California is so large that if the law takes effect, the rest of the country will have to follow, said Paul Rudolph, a former associate commissioner at the FDA.

One question for the pharmacy board, said some people who are attending the hearing, is whether it has the authority to delay all or part of the law. Even the law’s supporters, like Dahl, concede that the technology required to track individual bottles of drugs - a process called serialization - isn’t ready yet and may not be for two or three years.

But Dahl contends that companies can electronically track and record the movement of boxes of drugs by tracking transactions, and some are already doing it. Big pharmaceutical companies track drugs this way, he said, and their systems integrate with the tracking systems of big transporters like FedEx and UPS.

“It’s better than paper tracking, and we don’t even have that,” he said.

Other people, like Liang, said the law should not take effect until it can be uniformly enforced. He said smaller pharmacies and drug wholesalers may have trouble affording the technology required to comply with the law, and “will do the cheapest thing possible” if they’re forced to comply.

The board is not expected to reach a decision today. Phony pharmaceuticals

If you suspect a counterfeit drug, contact:

– The Food and Drug Administration, «www.fda.gov» or (800) 332-1088

– The drug’s manufacturer

– The California Board of Pharmacy, links.sfgate.com/ZCFM or (916) 574-7909.

Source: Chronicle research

E-mail the writers at dgage@sfchronicle.com and vcolliver@sfchronicle.com.