While you were sleeping: Goldman Sachs, IMF surprise

Thursday 19th January 2012

Stocks on Wall Street advanced after Goldman Sachs Group's earnings bettered expectations and the International Monetary Fund said it's considering shoring up its lending capacity to propel the global economy.

Goldman Sachs posted fourth-quarter earnings that surpassed analyst expectations, boosting the stock by more than 6 percent. Morgan Stanley is scheduled to report earnings tomorrow.

Also welcomed by investors were comments by the IMF that it's looking at raising its lending capacity by as much as US$500 billion to help safeguard the global economy against the impact of Europe's fiscal troubles. The euro strengthened 0.6 percent to US$1.2818.

"It's too early to get excited about Europe, but the IMF news is clearly a positive and a sign Europe is on its way to stabilising," Jerome Heppelmann, chief investment officer at Old Mutual Focused Fund in Berwyn, Pennsylvania, told Reuters.

In early afternoon trading in New York, the Dow Jones Industrial Average gained 0.42 percent, the Standard & Poor's 500 Index advanced 0.47 percent and the Nasdaq Composite Index climbed 0.85 percent.

Meanwhile, Greece is close to a deal with private creditors that would give them cash and securities with a market value of about 32 cents per euro of government debt, Bloomberg News reported, citing Bruce Richards, who is on the creditors’ committee and chief executive officer for Marathon Asset Management.

The deal is needed to secure the next line of bailout funds as Greece works to avoid bankruptcy.

"In the end, something is likely to be agreed partly because no side is going to want to see a disorderly default," Ben May, European economist at London-based Capital Economics, told Reuters. "There's likely to be an element of brinkmanship taking place from both sides in order to get the best terms."

In Europe, the Stoxx 600 Index ended the day with a gain of less than 0.1 percent.

Estimates for economic performance have been adjusted on several fronts.

The World Bank said the global economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent. The euro area may contract 0.3 percent, compared with a previous forecast for a 1.8 percent expansion, according to the World Bank, which also lowered its expectations for American growth to 2.2 percent from 2.9 percent.

Incidentally, a report showed US industrial production rose 0.4 percent in December. That missed the median estimate for a gain of 0.5 percent in a Bloomberg survey of economists.

In Germany, the government downgraded its forecast for growth this year to 0.7 percent from a previous 1 percent estimate.

(BusinessDesk)

BusinessDesk.co.nz

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