World stocks boosted by rising risk appetite
LONDON -- World stock markets rose and the dollar fell Wednesday after upbeat U.S. earnings -- particularly from Intel Corp. and Goldman Sachs Group Inc. -- fueled demand for riskier assets amid hopes that the U.S. economy could soon be growing again.
In Europe, the FTSE 100 index of leading British shares was up 72.59 points, or 1.7 percent, to 4,310.27 while Germany's DAX rose 94.11 points, or 2 percent, to 4,875.80. The CAC-40 in France rose 51.43 points, or 1.7 percent, to 3,133.30.
A solid opening was also expected on Wall Street, where earnings news will be limited. Dow futures were up 64 points, or 0.8 percent, at 8,368 while the broader Standard & Poor's 500 futures rose 8.4 points, or 0.9 percent, to 909.80.
"Market sentiment is positive and this is being reflected in the equity markets (which) took comfort from Goldman's results yesterday and an upbeat forecast from Intel," said Neil Mackinnon, chief economist at ECU Group.
Goldman Sachs kicked off the U.S. banks second-quarter earnings season, reporting second quarter earnings of $2.72 billion, or $4.93 per share, after preferred stock dividends, up on last year's $2.05 billion, or $4.58 per share.
Over the rest of the week, investors will be particularly interested to see if other big U.S. banks, such as Citigroup Inc. and Bank of America Corp. are in similarly good shape.
Not all the focus rests on the banks, though their improved financial condition could be a harbinger of higher lending to businesses and consumers -- crucial if any recovery is to sustain itself.
Investors are closely monitoring earnings this week from retailers to industrialists and the world of technology.
Intel stoked hopes in an after-hours statement that the technology sector may be rebounding The company reported a better-than-expected net profit of $1 billion for the second quarter, or 18 cents a share. That figure, though, excluded a massive $1.45 billion antitrust fine from the European Union. Including the fine, Intel lost $398 million, or 7 cents per share.
Despite the fine, investors were heartened to hear the company's chief executive Paul Otellini describe the second quarter growth as the best since 1988 and that he expected a "seasonally stronger second half."
Otellini's comments hark back to the hopes that underpinned the rally in equities from the middle of March to the start of June. Investors were then hopeful that the U.S. economy in particular would recover from recession sooner than anticipated and that stocks were undervalued relative to their earnings potential.
But disappointing economic news over the last few weeks altered the mood prevailing among investors that a significant rebound in the U.S. was possible. Since recent highs in early June, the S&P index and the Dow Jones industrial average have dropped around 7 percent.
With earnings releases few and far between Wednesday, investors may well focus more on the macroeconomic releases due, such as U.S. June industrial production data and the Empire State survey into manufacturing conditions in and around New York.
Stuart Bennett, an analyst at Calyon Credit Agricole, said the numbers might well "prompt an increase in nervousness about the pace of recovery" despite recent comments from U.S. Treasury Secretary Tim Geithner that the recession may end in months.
Earlier in Asia, Japan's benchmark Nikkei 225 stock average rose for the second day running, closing 7.44 points, or 0.1 percent, higher at 9,269.25. Previously it had fallen for nine straight sessions. And Hong Kong's Hang Seng jumped 372.93, or 2.1 percent, to 18,258.66.
Elsewhere in Asia, South Korea's Kospi, the region's best performer, gained 2.6 percent, while Australia's benchmark index gained 1.5 percent and China's Shanghai index rose 1.4 percent.
Oil prices rose above $60 a barrel as investors looked to a weekly inventory report for clues on U.S. gasoline demand. Benchmark crude for August delivery was up $1 to $60.52 a barrel in electronic trading on the New York Mercantile Exchange.
The dollar fell 0.2 percent 93.41 yen while the euro rose 0.8 percent to $1.4086.
In recent week's the dollar's fortunes have fluctuated inversely with stocks. When risk appetite has been elevated, stocks have rallied and the dollar has dropped. Conversely, when shares have fallen, the dollar has tended to rise as it is widely considered a safe haven asset despite all the problems afflicting the U.S. economy.