Friday 17 July 2009

GLOBAL MARKETS: European Stocks Up;US Earnings Lift Sentiment

GLOBAL MARKETS: European Stocks Up;US Earnings Lift Sentiment

By Andrea Tryphonides

LONDON (Dow Jones)--European stocks traded in positive territory Friday, again taking their lead from the U.S. equity markets and earnings, with the latter surprising to the upside, led by JP Morgan's.

Mike Lenhoff, chief strategist at Brewin Dolphin said: "The results coming through are very supportive of a more promising outlook and the markets have been responding to that... I think there is a greater sense of conviction than there was before that a recovery is happening."

By 0755 GMT, the pan-European Stoxx 600 index was up 0.5% at 210.8. London's FTSE 100 was up 0.6% at 4388.0, Frankfurt's DAX increased 0.5% to 4985.0 and Paris's CAC-40 was 0.6% higher to 3220.1.

Gains were widespread across sectors Friday, although volumes were not exciting. With little in the way of fundamental macroeconomic data due for release investors had their eyes on further U.S. earnings for direction. These include news from banking giants Citigroup and Bank of America, as well as industrial conglomerate General Electric.

Meanwhile in Europe, autos led the market higher. Renault was up 1.3% at EUR25.9 despite announcing a 16.5% fall in global vehicle sales in the first-half of the year. The French car maker added that it has achieved a significantly positive free cash flow in this period but its net profit will be hit by a negative operating margin.

Elsewhere, British Airways soared 3.1% to 136.3 pence after it said it was set to raise GBP600 million through a bond issue and bank facilities to increase its liquidity. Also, the trustees of the group's pension fund agreed to release some bank guarantees back to the airline, making up to $540 million available for the airline to draw in cash.

In financials, Swedbank gained 3.3% to SEK50.0 after stating that it would review all commitments in the Baltic states and Ukraine and would continue to cut jobs, mainly in Eastern Europe, as bad loans in the region pushed the bank towards a worse-than-expected second-quarter loss.

On Thursday, U.S. stocks again showed strength, as the Dow Jones Industrial Average gained 1.1% to 8711.8. The Nasdaq Composite gained 1.2% to 1885.0 and the Standard & Poor's 500 rose 0.9%, to 940.7.

Investors are "positioning themselves to raise equity exposure as the earnings season unfolds," said Fred Dickson, market strategist at D.A. Davidson.

However, Ian Horsley, index trader at, said: "Despite better than expected results from the major banks it's very much been a stealth rally and investors may well be looking for a break of the recent highs of 8877 [on the DJIA] before they sense real optimism."

Elsewhere, Asian stock markets were mostly higher Friday, although gains were tentative before the weekend.

Japan's Nikkei 225 closed up 0.6%, South Korea's Kospi Composite up 0.6% and Hong Kong's Hang Seng index was 2.4% higher.

By contrast, Indonesia's share market fell 0.9% after bomb blasts at two luxury hotels in the Jakarta business district killed at least nine people and injured 50.

In the currency markets, the euro fell slightly against the yen and dollar Friday as players sold the common currency to lock in profits on its overnight rise.

But overall sentiment towards the European currency remained stable and it could resume rising if stock prices keep going up and U.S. financial institutions' earnings turn out to be robust, dealers said.

At 0810 GMT, the euro stood at $1.4088, compared with $1.4148 late Thursday in New York, and at Y131.91 versus Y132.89.

Turning to crude, the oil market edged lower Friday amid a bout of profit taking after prices topped $62 a barrel Thursday, lifted by stronger equities.

At 0810 GMT, the August crude contract on Globex stood at $61.72 per barrel, down 30 cents, having settled Thursday at $62.02 per barrel, 48 cents higher, on the New York Mercantile Exchange, the highest settlement price since July 7.

Also at 0810 GMT, spot gold stood at $936.25/oz, down from $937.35 in late New York trading.

European government bond markets were firmer, helped by some gains in U.S. Treasurys late Thursday and a degree of safe-haven buying after the blasts in Jakarta.

At 0815 GMT, the September bund contract stood at 121.71, 0.23 higher.

-By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281;

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(END) Dow Jones Newswires

July 17, 2009 04:17 ET (08:17 GMT)

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