While you were sleeping: Global stocks fundamentally good

Wednesday 3rd February 2010

Shares extended gains as bets that the global economy was strengthening bolstered metal prices and more U.S. companies reported better than expected quarterly earnings.

The Dow Jones Stoxx 600 gained 1% to 250.85. The European benchmark has risen 59% since March 2009.

Today’s advance was paced by mining companies including Rio Tinto and Anglo American, which both were on the receiving end of broker upgrades. The sector overall got a boost from higher prices with copper, lead, nickel and tin rising in London trading.

Societe Generale analyst Alain Williams wrote in a note for clients that the recent slide in metals stocks represented a buying opportunity because he was convinced that China would power ahead with its investment plans and demand for metals would recover in the major developed economies.

On the downside, BP shares dropped 3.9% after the company reported earnings that missed expectations and said it expected a “slow and gradual” recovery from the recession.

The FTSE 100 rose 0.68%, Germany’s DAX advanced 0.98% and France’s CAC 40 Index jumped 1.33%.

At midday on Wall Street, the Dow Jones Industrial Average was up 0.64%, the Standard & Poor’s 500 was up 0.78% and the Nasdaq Composite Index edged 0.46% higher.

Among the advancers were UPS, which forecast higher earnings this year. Positive earnings reports also paced Cummins and Emerson Electric higher. Homebuild DR Horton gained after reporting its first quarterly profit in almost three years.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 3.9% to 21.70.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 1.37% to 271.64.

Spot gold was bid at US$1111.10 an ounce at 1518 GMT, against US$1105.30 late in New York on Monday, according to Reuters data. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange rose US$5.40 to US$1109.70 an ounce.

The metal remained well supported near US$1110 an ounce by technical factors, traders told Reuters.

Benchmark copper for three-month delivery on the London Metal Exchange was at US$6840 a tonne at 1558 GMT from US$6791 on Monday, and up from a session low of US$6727.

Some analysts told Reuters that they believed copper prices looked fragile in 2010, as last year's vast stockpiling exercise by China had faded.

"We continue to expect copper prices to fall sharply this year as the boost from stockpiling fades, the recovery in final demand disappoints, the U.S. dollar recovers more ground and commodity prices drop further," Capital Economics said in a note, Reuters reported.

"Our initial target is US$5000 (a tonne), but over the medium to longer term the reduced copper-intensity of economic activity - even in China - could see copper prices back in the range of US$3000-4000 a tonne.”

Aluminium rose to US$2109 from US$2085. Stocks of the metal, used in transport and packaging, fell 3125 tonnes, holding near record levels above 4.6 million tonnes.

U.S. crude oil futures were trading US76 cents higher at US$75.19 a barrel by 1505 GMT. ICE Brent rose US86 cents to US$73.97.

The latest U.S. oil statistics will be released later today and tomorrow. Analysts in a Reuters poll expect the data to show falls in crude and middle distillate inventories, including heating oil, and an increase in gasoline stocks.

On the currency markets, the drop in the Aussie dominated.

The Australian dollar fell sharply after the Reserve Bank of Australia surprised traders by not raising its key benchmark interest rate. The Aussie slid 1% against the greenback and 1.2% versus the yen by mid morning in New York.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.13% to 79.06.

The U.S. dollar traded at US$1.3938 per euro, from US$1.3931 yesterday, when it rose to US$1.3853, the strongest since July 8, according to Bloomberg data. The U.S. currency was at 90.47 yen, from 90.61, and the yen traded at 126.04 per euro, from 126.24.

Businesswire.co.nz

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