World stocks buoyed by US earnings

AP News
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Posted: Oct 21, 2010 10:02 AM
World stocks buoyed by US earnings

World stocks mostly rose Thursday after another batch of forecast-busting U.S. corporate earnings and modestly better than expected Chinese economic growth figures.

In Europe, the FTSE 100 index of leading British shares was up 33.77 points, or 0.6 percent, at 5,762.70 while Germany's DAX rose 58.12 points, or 0.9 percent, at 6,582.67. The CAC-40 in France was 35.34 points, or 0.9 percent, higher at 3,863.49.

In the U.S., the Dow Jones industrial average was up 51.39 points, or 0.5 percent, at 11,159.36 soon after the open while the broader Standard & Poor's 500 index rose 5.60 points, or 0.5 percent, at 1,183.77.

Stocks are rallying on the back of more strong U.S. earnings from the likes of Caterpillar and McDonald's. After the close, highlights include Amazon and American Express.

"On the whole third quarter earnings are marginally better than expected," said David Buik, markets analyst at BGC Partners.

Solid weekly U.S. jobless claims figures helped shore up sentiment at the U.S. open _ the Labor Department reported that claims fell a greater than anticipated 23,000 last week to 452,000.

The main point of interest earlier was the news that China's rapid growth slowed to a still robust 9.6 percent in the third quarter from the year before. Though that was down from 10.3 percent in the previous quarter, it was modestly higher than expectations. There was also relief that inflationary pressures remained fairly benign.

Neil MacKinnon, global macro strategist at VTB Capital, said the data were "consistent with a 'soft landing' scenario for China."

China will also be at the center of this weekend's meeting of finance ministers from the Group of 20 leading industrialized and developing countries in South Korea to see if currency tensions are addressed.

In particular, investors will be looking to see if the U.S. and China can come to some sort of arrangement, whereby the Chinese allow their currency, the yuan, to appreciate at a more rapid pace against the dollar.

Simon Derrick, senior currency strategist at Bank of New York Mellon, said the stakes are high at the G-20.

"It seems to us that signs of an accord should prove dollar bullish as it would, presumably, see both the U.S. reaffirm its commitment to not devaluing its way out of trouble while China and others commit to actions that would see them accumulating less reserves and, hence, have less need to diversify them into currencies such as the euro," said Derrick.

"If no sign of an accord emerges, however, then this would likely see the euro vaulting higher and a very uncomfortable end to the year," he added.

Ahead of the meeting, the euro was up 0.3 percent on the day at $1.40 while the dollar was flat at 81.13 yen.

That means that the dollar's advance in the wake of China's surprise rate hike earlier this week has dissipated.

The dollar has been pressured of late by mounting expectations that the Federal Reserve will decide to pump more money into the U.S. economy.

An official announcement that the Fed is ready to buy more financial assets _ so-called quantitative easing _ in an attempt to drive down rates on mortgages, corporate loans and other debt in the ultimate hope of boosting economic activity and supporting prices, is expected to be announced on Nov. 3 after the conclusion of the next policy meeting.

Analysts said the scale of the Fed's buying will depend on how the economic figures are in the run-up to the rate-setting meeting.

"The path of the data remains central to the Fed debate, and the numbers between now and November 3 can still have a bearing on the outcome, even if the impact now looks likely to be confined to the size of the package," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole.

Earlier in Asia, Japan's benchmark Nikkei 225 stock index closed down 0.1 percent, or 5.12 points, to 9,376.48 amid ongoing yen strength, while Australia's S&P/ASX 200 ended the day flat at 4,622.9.

Among gainers, Hong Kong's Hang Seng rose 0.4 percent to 23,649.48 and South Korea's Kospi advanced 0.2 percent to 1,874.69.

Chinese shares were mixed Thursday _ the benchmark Shanghai Composite Index lost 20.42 points, or 0.7 percent, to 2,983.53 while the Shenzhen Composite Index for China's smaller, second exchange added 0.7 percent to 1,248.52.

Benchmark oil for December delivery was down 90 cents to $81.64 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.38 to settle at $82.54 on Wednesday.

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Associated Press Writer Pamela Sampson in Bangkok contributed to this report.