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While you were sleeping: Earnings renew outlook

Friday 30th April 2010

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As contagion fears eased, at least for the moment, investors renewed their focus on companies reporting better than expected results in both Europe and the US, lifting equities.

In late trading, the Dow Jones Industrial Average rose 1.17%, the Standard & Poor’s 500 gained 1.30% and the Nasdaq Composite rose 1.45%.
 
The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ dropped 10.9% to 18.79.

Among the actives were Visa Inc. Motorola Inc and the US shares of Baidu Inc. All three companies reported results that exceeded expectations.

The Nasdaq was lifted by Hewlett-Packard Co's plan to acquire Palm Inc. Shares in Palm surged 25%.

In a sign more investors are starting to warm to equities, US fund managers increased their already heavy investment in stocks in April and decreased bond allocations, a Reuters poll showed.

Based on 12 US-based management firms surveyed April 14-28, the poll found they held an average of 65.2% of assets in equities, compared with 64.6% a month earlier. The equities allocation had been 66.2% in February, which marks a post-crisis high. The poll results were taken before credit rating downgrades on Greece, Spain and Portugal.

In Europe overnight, the Dow Jones Stoxx 600 rose 1.4% to 261.74. 
 
Among national benchmarks, the UK ’s FTSE 100 rose 0.56%, Germany ’s DAX 30 rose 1% and France ’s CAC 40 gained 1.42%.

Of the companies on the Stoxx 600 that have reported earnings since April 12, about 70%  have beaten analysts’ estimates, according to data compiled by Bloomberg. In the US, almost 80% of S&P 500 companies have topped projections.

Some of the biggest movers included Banco Santander SA, Pernod Richard SA and National Bank of Greece SA. The two banks reported better than expected results and Pernod Richard increased its full-year earnings forecast.
 
The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.49% to 81.97.

The euro fell to a one-year low of US$1.3115 yesterday in New York, down from 2009’s high of US$1.5144 on Nov. 25, as German Chancellor Angela Merkel said the stability of the euro zone” was at stake if a 45 billion-euro loan package for Greece orchestrated by the International Monetary Fund can’t be delivered soon.

Currency strategists are having a hard time keeping up with the decline. The median average of 32 forecasts compiled by Bloomberg is for the currency to end the year at US$1.32. In February, the estimate was US$1.43. The euro was at US$1.3236 at 3:25 p.m. in London today.

“Central bankers and institutional investors have spent 10 years pricing out the likelihood of a euro-zone break-up, and now they have to price it in again,” Emma Lawson, a currency strategist in London at Morgan Stanley, told Bloomberg. “The euro will no longer have this additional support going forward.”

The euro, introduced on January 1, 1999, at a rate of about US$1.17, weakened to US82.30 cents in 2000 as the region’s economy slumped amid the bursting of the dot-com bubble. It peaked at US$1.6038 in July 2008 as the global financial crisis worsened.

Treasuries rose as the US’s sale of US$32 billion in seven-year notes drew higher-than-forecast demand in the last of four auctions this week of a record US$129 billion of inflation-protected debt and notes, Bloomberg reported.

The securities drew a yield of 3.21%, compared with a forecast of 3.23% in a Bloomberg survey of seven of the federal Reserve’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.82. The average at the last 10 auctions was 2.76.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.28% to 275.27.


In the US, the world' biggest oil consumer, crude for June delivery was up US$2.09, or 2.5%, at US$85.31 a barrel, at 11:45 a.m. EDT.

In London, the ICE Brent June crude was up US$1.45, or 1.7%, at US$87.61.

According to EIA data, U.S. gasoline demand jumped 3.1% in the past four weeks from a year earlier, causing an unexpected 1.2 million barrel drop in gasoline inventories last week.

The news raised expectations for demand growth during the summer driving season, which starts in May.

Spot gold rose to a high of US$1,174.18, the loftiest level since December 4. It was at US$1,166.65 an ounce at 3:54 p.m. EDT, against US$1,168.03 late in New York on Tuesday.

US gold futures for June delivery on the COMEX division of the NYMEX settled up US$9.60 at US$1,171.80 an ounce.

US copper futures settled at a six-week low on concerns about Chinese demand. Copper for July delivery shed 3.60 cents, or 1%, to end at US$3.3505 per lb on the New York Mercantile Exchange's COMEX division.

 

 

Businesswire.co.nz



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