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While you were sleeping: Banks bolster Europe

Thursday 18th February 2010

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Another solid earnings report from a bank, France’s BNP Paribas, helped lift investors’ spirits and drive shares sharply higher in Europe. Shares in the US were higher, though the gains were modest.

Earnings and signs of strengthening economies were the main themes.

BNP Paribas, France’s largest bank, reported its fourth quarterly profit in a row, a day after the U.K.’s Barclays posted a doubling of its second-half profit.

The bank results helped to ease some of the gloom in Europe caused by the continuing indecision about what to do with euro-zone members’s deficit woes.

In early afternoon trading on Wall Street, the Dow Jones Industrial Average was up 0.35%, the Standard & Poor’s 500 was up 0.34% and the tech-laden Nasdaq Composite was up 0.28%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 1.44% to 21.93.

Among the advancers were Deere & Co., United Technologies and Whole Foods. Momentum though seems to have faded a bit as investors wait for a new catalyst.

The Dow Jones Stoxx 600 rose 1.4% to 247.69. Across Europe, all major markets advanced. The UK’s FTSE 100 advanced 0.6%, France’s CAC 40 Index gained 1.5% and the DAX Index in Germany was up 1%.

BNP Paribas, ING Groep, CNP Assurances and Deutsche Boerse all contributed to the advance. Man Group also rose.

On the economic front, the U.S. Commerce Department said housing starts were higher than expected in January and the Federal Reserve said industrial output rose at a higher pace in January than December.

"Foreign demand growth continues to be very strong, particularly from Asia, and we’re starting to see capital spending pick up," Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who correctly forecast the gain in production, told Bloomberg. "The recovery looks intact."

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.88% to 80.34.

Growing international pressure makes it likely that Beijing will allow its currency to begin rising in value again this year, according to a Bloomberg report on comments by two U.S. private sector China specialists.

"I think you'll see appreciation probably resume this year," John Frisbie, president of the U.S.-China Business Council, said during a panel discussion. "I think the pressures are building up for them to do so."

In midday trading in New York, the dollar was 0.7% higher at 90.75 yen, after touching a session high of 91.15 yen in the aftermath of the data.

The euro fell 1.1% to as low as US$1.3598, down from as high as US$1.3779 on Tuesday.

In the United States, investor focus now may shift to the Federal Reserve's January policy meeting minutes, due out at 2pm (1900 GMT) for insights into the U.S. central bank's exit strategy.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.43% to 273.60.

U.S. crude for March delivery fell 38 cents to US$76.63 a barrel at 11.43am EST. It closed 3.9% higher on Tuesday, its biggest percentage gain since September 30 when it rose 5.8%.
London Brent crude for April dropped 15 cents to US$75.53 a barrel.

Spot gold was bid at US$1122.75 an ounce at 1450 GMT, against US$1118.95 late in New York on Tuesday. US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose US$2.70 to US$1122.00 an ounce.

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