US earnings prop up stocks, euro gains again

AP News
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Posted: Apr 21, 2011 7:01 AM
US earnings prop up stocks, euro gains again

Upbeat U.S. earnings buoyed stock markets around the world Thursday ahead of another round of company reports, while the euro neared a one-and-a-half year high against the dollar as investors were willing to take on more risky trades

Following a long period when investors have been focusing on other issues, such as Japan's earthquake and tsunami, Europe's debt crisis and the unrest in the Arab world, earnings have returned to prominence.

So far, the latest corporate results season has been generally positive, with a number of companies announcing forecast-busting earnings in another sign that the U.S. economy, the world's largest, is performing strongly.

Particularly encouraging was Wednesday's after-hourse statement from Apple Inc. that its hit iPhone helped earnings nearly double. Apple's technology peer Intel Corp. also beat expectations, helping to buoy sentiment toward the technology sector. General Electric Co. then kicked off a slew of results Thursday on a positive note.

Others reporting Thursday include McDonald's Corp. and Morgan Stanley & Co.

"In the past couple of days, the U.S. earnings season has enabled investors shrug off the euro woes and budget deficit concerns that dogged the early part of the week," said Yusuf Heusen, senior sales trader at IG Index.

"Intel's strong figures yesterday, followed closely by Apple's blockbusting results, seem to have ignited risk appetite once more and investors will be looking for more of the same before the Easter break," Heusen added.

In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 6,028 while Germany's DAX rose 0.7 percent to 7,298. The CAC-40 in France was 0.4 percent higher at 4,021.

Wall Street was poised for a third day of gains following Monday's retreat when investors were spooked by Standard & Poor's warning that the U.S. faces a one-in-three chance of having its triple A credit rating downgraded. Dow futures were up 0.4 percent at 12,447 while the broader Standard & Poor's 500 futures rose 0.5 percent to 1,335.

Buoyant stock markets are an indication of heightened investor appetite for risk. That affects other markets too and in the currency markets the euro and the Australian dollar were the big gainers as investors looked for better interest rate returns instead.

"Monday is a distant memory and markets have shifted from shunning risk into the upcoming holiday period to assuming as much of it as they can," said Robert Ryan, a foreign exchange strategist at BNP Paribas.

The euro was up another 0.9 percent at $1.4633 by late morning London time, a little shy of its earlier high of $1.4648, which is its strongest level since December 2009.

Despite occasional bouts of weakness, such as on Monday when the dollar _ perhaps surprisingly _ gained support from its widely-perceived status as a safe haven asset, the euro has been strong all year as it benefits from expectations that the European Central Bank will follow up this month's first interest rate rise in nearly three years with more increases in the months ahead.

The Australian dollar was also in the spotlight, as it surged as investors flocked to so-called high yielding currencies.

Australia's benchmark interest rate is much higher than the U.S., giving investors better returns, and it is likely to be increased further if world growth gains momentum.

At one point Thursday, the Australian dollar surged to $1.0741 on Thursday _ its highest level since it was floated in December 1983.

"There's been a general rise in risk appetite, reflected not only in equities but in Asian currencies, which have strengthened as well," said David Cohen , economist at Action Economics in Singapore.

Earlier in Asia, Japan's Nikkei 225 index closed up 0.8 percent to 9,685.77 while South Korea's Kospi index rose 1.3 percent to 2,198.54. Hong Kong's Hang Seng ended 1 percent higher to 24,138.31, and mainland China's Shanghai Composite Index rose 0.7 percent to 3,026.67.

In the oil markets, the focus remained on the fighting in Libya. Oil prices have increased 20 percent since the beginning of the year as investors anticipated rising global demand while unrest in North Africa and the Middle East threatened oil fields and shipping lanes vital to world supply.

Benchmark crude for June delivery rose 62 cents to $112.07 a barrel on the New York Mercantile Exchange. The contract rose $3.17 to settle at $111.45 on the Nymex on Wednesday.

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Pamela Sampson in Bangkok contributed to this report.