While you were sleeping: Equities lift on results, China

Thursday 14th October 2010

While the rescue of 33 miners in Chile proceeded at a faster rater than anticipated, optimism from better-than-expected earnings from blue-chip companies and encouraging data from China buoyed the spirits of share markets in Europe and on Wall Street.

In early afternoon trading in New York, the Dow Jones Industrial Average gained 1.0%, the Standard & Poor's 500 rose 1.08% and The Nasdaq climbed 1.27%. Shares in Apple passed through the $US300 mark for the first time as most key tech stocks advanced.

In China, business confidence and the trade surplus narrowed, adding to the market’s positive sentiment a day after minutes from the US Federal Reserve showed policy makers are set to further bolster the economy by easing monetary policy again.

China’s foreign-exchange reserves increased by a record to US$2.65 trillion at the end of September while a 25% climb in exports lifted its trade surplus to US$16.9 billion.

Railroad operator CSX, JPMorgan Chase and Intel reported stronger-than-expected earnings.

"Earnings reports to date appear to be justifying the recent rally, and I think that's allowing people to feel like they're getting good value by continuing to buy stocks," Michael Cuggino, president of Permanent Portfolio Funds in San Francisco, told Reuters.

In Europe, the Stoxx 600 rose 1.4% to 266.25 at the 4.30pm close in London. National European benchmark indexes advanced in all 18 western markets today, except Luxembourg.

Porsche SE gained the most in almost three months after the carmaker narrowed its full-year loss.

US Treasuries fell. The 10-year note yield rose four basis points to 2.48% at 1.35 pm in New York, according to BGCantor Market Data. The yield on the 30-year bond climbed five basis points to 3.87%.

The US government’s sale of US$21 billion drew a yield of 2.475%. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.99, versus an average of 3.1 for the past 10 sales.

The Dollar Index, which measures the greenback against a basket of six major currencies, dropped 0.4% to 77.05.

In mid afternoon trading, the euro rose 0.3% to US$1.3966. The $US1.40 mark was proving a difficult one to breach.

"With the FOMC minutes validating the market's expectations for stimulus in November, investors have jumped back into the market to sell [US] dollars," Kathy Lien, director of currency research at GFT in New York, told Reuters.

The greenback was 0.1% higher at 81.84 yen, supported by concern that Japanese authorities could intervene the closer it gets to its record low of 79.75 yen.

Climbing to the highest level in two years, the Reuters/Jefferies CRB Index of commodities advanced 0.68% to 299.88.

Gold surged to a record high, bringing the precious metal’s gains this year to 25%, as investors fled from US currency-denominated assets amid concern the greenback will weaken further after the Federal Reserve signalled it would resume buying government debt to bolster the economy.

"With the weaker [US] dollar, inflation will pick up in the commodity space, which is the most sensitive to monetary stimulus. So, it's only logical that gold will do very well in that environment," Axel Merk, portfolio manager of the Merk Hard Currency Fund, told Reuters.

Spot gold rose to a record US$1,374.15 an ounce earlier in the session. Recently it was 1.6% higher at US$1,371.05.

US December gold futures added US$25.80 to US$1,372.50.

Businesswire.co.nz

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