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While you were sleeping: Earnings lift spirits

Wednesday 14th July 2010

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Alcoa Inc’s expectations of growing global demand bolstered commodities and equity markets in the US and Europe.

Alcoa’s earnings - released after Wall Street closed yesterday - topped estimates and the biggest US aluminum producer forecast global aluminum consumption would expand 12% this year, up from its previous estimate of 10%.  

In late trading, the Dow Jones industrial average rose 1.56%, the Standard & Poor's 500 Index gained 1.49% and the Nasdaq Composite Index climbed 1.65%.

“You basically had companies report not just good quarters, but good guidance,” Eric Green, director of research at Penn Capital Management in Philadelphia, told Bloomberg News.

“Not much caution about the future, which is what everybody had feared the last several weeks.”

All four S&P 500 companies that reported results since the market closed yesterday topped the average analyst estimate for per-share profit in Bloomberg surveys.

Also among the most active stocks on Wall Street were ADC Telecommunications Inc, Borders Group Inc and American International Group Inc.

It wasn’t a good day for all stocks though.

Shares of Apple Inc fell 2.6%  a day after US Consumer Reports said it wouldn’t recommend the iPhone 4, fanning concern that demand for the latest version of the smartphone might drop and amid some speculation that the handset might be recalled.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 2.66% to 23.78.

The Stoxx Europe 600 Index gained 1.9% to 255.99, erasing this year’s losses.

Across Europe, the UK’s FTSE 100 and France’s CAC 40 each climbed 2% and Germany’s DAX rose 1.9%.

Greece sold 1.63 billion euros (US$2.1 billion) of 26-week Treasury bills at a rate below the 5%charged by the European Union for its bailout package, easing concern about the nation’s borrowing costs and showing growing confidence among banks in Greece who bought 80% of the bills today.

Among the most active stocks in Europe were Bayerische Motoren Werke AG, BP Plc and Daimler AG.  

BMW, the world’s largest maker of luxury cars, jumped 8.3% after raising its sales forecast. It said 2010 sales volumes would advance by about 10% to more than 1.4 million units.

Portugal’s PSI-20 Index’s gains were limited, rising 0.1%, as Moody’s Investors Service cut the nation’s credit rating by two notches to A1 because of its rising debt burden and weak economic growth prospects.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.74% to 83.58.

The euro rose 1.1% to US$1.2739, according to electronic trading platform EBS, its highest level since mid-May. Earlier, it fell to US$1.2522 after Moody's downgraded Portugal's debt rating.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 1.24% to 261.61.

Oil prices rose as better-than-expected corporate earnings boosted confidence about the global economic outlook.

At 12pm EDT (1600 GMT), US crude for August delivery was up US$1.97 at US$76.92 a barrel.

In London, Brent crude oil for August delivery was up US$2.10 at US$76.47 a barrel. The August contract price moved briefly above September as traders bet maintenance in the North Sea would boost Brent in the short term.

Gold rose nearly 2% in Europe after a ratings agency downgrade of Portugal boosted the metal's appeal as a haven from risk and a hedge against currency market volatility.

Spot gold was bid at US$1,213.90 an ounce at 1522 GMT, against US$1,194.85 late in New York on Monday. US gold futures for August delivery rose US$15.90 an ounce to US$1,214.60.

"The downgrade reminded people that Europe is not really in a good way," Commerzbank senior trader Michael Kempinski, told Reuters.

Among other precious metals, silver was at US$18.23 an ounce versus US$17.86, platinum at US$1,519.50 an ounce against US$1,512, and palladium at US$460.60 against US$452.

US copper futures rose from a near one-week low.

Copper for September gained 1.30 cents to US$3.0220 per pound by 10.19am EDT (1419 GMT) on the COMEX metals division of the New York Mercantile Exchange.

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