World markets await Bernanke's assessment
LONDON -- European stock markets rose Tuesday as Wall Street futures turned higher ahead of more key U.S. corporate earnings and an assessment of the U.S. economy from Federal Reserve chairman Ben Bernanke.
In Europe, the FTSE 100 index of leading British shares was up 41.85 points, or 0.9 percent, at 4,485.37 while Germany's DAX rose 66.93 points, or 1.3 percent, to 5,097.08. The CAC-40 in France was 36.11 points, or 1.1 percent, higher at 3,307.05.
Earlier in Asia, Tokyo's market outperformed the region to hit a two-week high after being closed for a holiday Monday, as investors seemed to shrug off the unfolding shake-up in Japanese national politics. Japan's Cabinet agreed to dissolve the powerful lower house of parliament, setting the stage for national elections that could topple the country's ruling party.
Tokyo's benchmark Nikkei 225 stock average closed up 256.70 points, or 2.7 percent, to 9,652.02 but Hong Kong's Hang Seng closed down by only 0.64 of a point at 19,501.73.
"If the current rally is going to run out of steam anywhere then this is as good a place as any, but so far the buyers still have the upper hand," said Philip Gillet, a sales trader at IG Index.
"The next couple of days' performance should play a big part in market sentiment for the rest of the summer," he added.
At the moment, U.S. stocks were expected to open modestly higher. Dow futures were 36 points, or 0.4 percent, higher at 8,841 while the S&P 500 futures rose 2.7 points, or 0.3 percent, to 951.70.
The rally in global stock markets over the last week or so has emerged alongside a string of better than expected U.S. second-quarter earnings, most notably from the banks, such as Goldman Sachs Group Inc. The news that U.S. commercial lender CIT Group Inc. has approved a $3 billion rescue package from bondholders helped sustain optimism into the new week.
Since last Monday, the Dow Jones industrial average and the broader Standard & Poor's 500 index have added around 7 percent, while Britain's FTSE has climbed over 6 percent.
Attention this week will once again be on the U.S. earnings -- among those to report include financial services and travel company American Express Co. and aircraft maker Boeing Co.
Early reports Tuesday from the likes of heavy machinery firm Caterpillar Inc. and Coca-Cola Inc. have come in generally better than expected.
The reporting season also kicks into gear in Europe this week, with pharmaceuticals company GlaxoSmithKline PLC, mobile phone operator Vodafone PLC, Swiss bank Credit Suisse AG and French foods company Danone SA.
Investors will also be looking this week to Washington for direction when Bernanke makes his half-yearly testimony to Congress Tuesday and Wednesday. A key concern for investors is how the central bank plans to eventually undo extraordinary emergency measures such as pumping money into the U.S. economy at the same time as slashing borrowing costs to near zero percent.
Even if Bernanke paints a relatively rosy picture about the state of the U.S. economy, investors remain wary of assuming gains will continue, as the March to June advance was predicated on similar hopes that the worst of the recession had passed.
However, analysts at Goldman Sachs said the rally still has legs and have raised their year-end target for the S&P to 1,060, even though the index at 951 at Monday's close is at the top-end of its three-month trading range -- often a cue for investors to book profits.
Neil Mackinnon, chief economist at ECU Group, reckons stocks continue to push higher in the coming weeks even though he has a fairly downbeat view of the state of the world economy.
"In spite of my own more bearish views on the global macro economy, I have nevertheless advised in recent weeks that the equity market could grind higher over the summer given the relative underweight positions of real money investors as well as a variety of sentiment and positioning indicators that pointed to equities tending to go up rather than down," said Mackinnon.
Elsewhere in Asia, South Korea's Kospi rose 0.7 percent to 1,488.99. Benchmarks in Australia and Taiwan also climbed modestly. China's Shanghai market dropped 1.6 while Singapore was marginally lower.
Benchmark crude for August delivery was changing hands at $64.61 a barrel, up 61 cents in the session.
The dollar was steady at 94.22 yen while the euro was flat at $1.4220.