World stocks at year highs on earnings, China

Scott Olson/Getty ImagesStrong growth in China and upbeat corporate earnings lifted world stocks on Thursday to a new high for the year, putting them at levels last seen around the collapse of Lehman Brothers.

LONDON -- Strong growth in China and upbeat corporate earnings lifted world stocks on Thursday to a new high for the year, putting them at levels last seen around the collapse of Lehman Brothers.

World stocks as measured by MSCI were up 0.1 percent, extending recent gains to September 2008 levels. The index all-country world index is now up around 6 percent this year.

China's economic growth quickened in the first quarter to 11.9 percent year-on-year, the fastest pace since 2007, benefiting from a low base of comparison last year and the momentum imparted by massive government stimulus.

At the same time, investors are being buoyed by robust earnings announcements on Wall Street.

JPMorgan reported quarterly profit that beat forecasts, as investment banking earnings gained and loan losses slowed. Tech bellwether Intel Corp also posted better-than-expected results.

"There was a bit of a stumble at the start of U.S. results with Alcoa, but after that we've had a lot of good news with Intel and JPMorgan," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

The pan-European FTSEurofirst 300 was up 0.3 percent for a year to date gain of nearly 6 percent. Japan's Nikkei earlier closed up 0.6 percent.

Japan has generally been outperforming this year. The Nikkei is up close to 7 percent and the broader TOPIX has gained more than 10 percent since the end of 2009.

The dollar initially fell after the Chinese data, but later recovered, while the euro came under selling pressure after a widening in the spread between Greek and German bonds highlighted ongoing concerns about Greece's debt problems.

Analysts said ongoing improvement in the Chinese economy would bolster the argument for a strong yuan currency, and that a freer exchange rate may be soon in the offing. Such a move is seen boosting Asian currencies to the detriment of the dollar.

"The data was another piece of the revaluation puzzle," said Sven Schubert, currency analyst at Credit Suisse in Zurich.

The dollar was up 0.2 percent against a currency basket after spending much of the day in negative territory. On Wednesday, it sank to a four-week low.

The euro slipped 0.4 percent to the day's low of $1.3586, pulling back from the day's high of $1.3666.

Euro zone government bonds yields were flat to slightly lower, with core government bonds remaining broadly supported as sovereign credit concerns remain at the forefront of investors' minds.

Persistent worries about Greece's debt pushed 10-year yield spreads over Bunds back above 400 basis points on Wednesday, and Portugal was also under pressure, with the cost of insuring the country's debt against default hitting its highest since February after the European Commission said the country may need additional fiscal cuts this year.

© Thomson Reuters 2010

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Europe stocks edge lower as E.U. details Greek aid plan

LONDON (MarketWatch) -- Stocks in Europe edged slightly lower Monday, as more details of a potential backstop for Greece helped banks rise, while the media and metals sector lost ground.

fter ending higher for the sixth straight week, the Stoxx Europe 600(ST:SXXP 268.99, -0.75, -0.28%) slipped 0.1% to 269.43, with media and resource sectors lower.

Europe stocks had gained on Friday on anticipation of a Greek rescue plan.

Publisher Wolters Kluwer(NL:WKL 15.85, -0.22, -1.37%) lost 1.5% on the Euronext Amsterdam on a Morgan Stanley downgrade, and miner Xstrata(UK:XTA 1,281, -19.00, -1.46%) fell over 1% on the London Stock Exchange.

Markets were having their first chance to react to Sunday's news that euro-zone nations were willing to lend Greece 30 billion euros, with the countries also detailing what rate they will charge. Greece has not yet asked for the aid to be delivered amid hopes they will be able to return to the bond market. See story.

"The announcement of the aid mechanism is a rather positive development, as first of all it lifted the uncertainty over its form and as the loans offered are at a significantly lower rate than of the current market ones," said analysts at Proton Bank in Athens.

Credit-default swaps on Greece fell sharply and the euro(CUR_EURUSD 1.3583, -0.0042, -0.3083%) climbed 0.8% to $1.3608, and Greek banks shot higher, with EFG Eurobank Ergasias up 11% and Piraeus Bank up 10.7%. See story.

The U.K. FTSE 100(UK:UKX 5,762, -8.59, -0.15%) slipped 0.1% to 5,768.09, the German DAX(DX:DAX 6,234, -16.02, -0.26%) fell marginally to 6,248.07 and the French CAC 40(FR:PX1 4,050, -0.39, -0.01%) fell 0.1% to 4,047.13.

Futures on the Dow Jones Industrial Average edged up 9 points.

In Warsaw, the WIG 20(XX:??? 2,554, +31.22, +1.24%) rose 0.5% to 2,566.68 and the zloty gained in the aftermath of Poland's president and numerous other senior officials, including the head of the central bank, getting killed in a plane crash in Russia over the weekend. See Poland story.

Swiss bank UBS(CH:UBSN 18.25, +0.57, +3.22%)(UBS 17.24, +0.72, +4.36%) rose 4.1% as it said it expects to swing to a first-quarter pretax profit of at least 2.5 billion Swiss francs ($2.4 billion), compared to a loss of around 1.5 billion francs a year earlier. UBS estimated outflows in its main wealth management and Swiss banking unit were around 8 billion francs, compared to 33.2 billion francs in the fourth quarter. See UBS story.

Shares of Home Retail (UK:HOME 293.60, +14.60, +5.21%) rose 5.2% to 295 pence a share after a report in The Mail on Sunday that Wal-Mart Stores' held Asda is looking for acquisitions in the U.K. Read more in London Markets.

While saying that she had "no idea" whether Asda would mount a bid, Kate Calvert of Shore Capital said Home Retail's Argos unit would fit nicely with the Wal-Mart unit's desire to increase non-food sales.

"They have the infrastructure, and they have made it work in smaller formats where Asda has struggled," she said. She said Home Retail could be valued at 370 pence a share on a leveraged buyout model without squeezing much out of the business.

ARM Holdings (UK:ARM 238.60, -5.20, -2.13%) (ARMH 11.00, -0.27, -2.40%) fell 2% as Citi cut the U.K. microchip designer to sell from hold, saying it trades at 32 times consensus 12-month forward earnings -- a 70% premium to global semiconductor peers. "While the resilience of ARM's business model through the downturn and leverage potential through the upturn argue for a premium, valuation has now run ahead of fundamentals, in our view," the broker said.

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London stocks supported by US gains

Strong US data and some lively performances over the Easter weekend from Asian and US stocks were expected to keep the London equity market supported for most of Tuesday’s session.

Closed on Good Friday and Easter Monday, Tuesday was the first time London’s FTSE indices had chance to react to US non-farm payrolls data published on Friday, which had driven rallies across Asia and on Wall Street on Monday.

By mid morning, the FTSE 100 was up 38 points or 0.7 per cent to a fresh 21-month high of 5,782.62. The FTSE 250 added 1 per cent to 10,411.88.

Petrofac, the oilfield services company, moved from the bottom to the top of the FTSE 100 leaderboard on its first trading day after the demerger of its oil and gas assets into a spin-off company called EnQuest.

The share split left the new Petrofac shares up 4.7 per cent to £12.44, and EnQuest shares trading at 107.4p each.

Miners were mostly higher, with Xstrata up 2 per cent to £13.26 after announcing its final pricing deal for supply of thermal coal to a big Japanese power generator at an 11.5 per cent premium over spot prices.

Fraser Jamieson at JPMorgan said: ”The premium over spot is slightly larger than previous settlements, which perhaps reflects a recognition from Japanese users of the need to pay up to secure supply in a market where China is becoming a more significant player.”

Meanwhile, Credit Suisse remained upbeat on the sector, saying that in spite of the robust rally in mining stock over the past year, it was still too early to call a peak in the price/earnings ratio.

”We believe it is too early to call the peak in the earnings cycle at this stage in the global recovery,” it said.

”Sector earnings and margins have rebounded strongly from the lows in 2009 but remain below the previous peak in 2007-08.”

Vedanta Resources rose 1.9 per cent to £29.18, while Kazakhstani rivalsEurasian Natural Resources and Kazakhmys climbed 2.5 per cent to £12.55 and 2.4 per cent to £16.20 respectively.

Banks were in focus after Gordon Brown, UK prime minister, said that big financial centres were now close to agreeing a global tax on banks that would help prevent future dislocations in the system that led to the financial crisis.

Part-nationalised Royal Bank of Scotland and Lloyds Banking Group were up 1.7 per cent to 45.4p and 1.4 per cent to 65.1p respectively.


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Retail results help lift London stocks

By Neil Dennis
Published: March 25 2010 08:39

London equity markets had a distinctly retail flavour on Thursday after two of the FTSE 100’s top consumer-led stocks reported full-year earnings, while February sales data showed a pick-up in shopping activity.

Both Kingfisher, operator of Britain’s top DIY chain, and Next, the fashion retailer, reported earnings that beat market expectations, but both were cautious about their prospects for 2010, joining the chorus of retail groups that have already reported.

Kingfisher, the owner of B&Q, said annual profit jumped 49 per cent to £547m, beating an average forecast of £543m. The company lifted its dividend for the first time in five years, by 3.3 per cent to 5.5p a share.

Ed Woolfitt at Galvan Equity Research was impressed by the results and unperturbed by the cautious outlook.

He said: “With growth seen in virtually all its markets, the momentum is very much with Kingfisher now and we are projecting a return to year highs of 249p and beyond in the next few weeks as the markets take on board the actual pace of the turnaround.”

After early gains, however, profit taking set in on the shares, which fell 0.7 per cent to 226.8p.

Next reported an 18 per cent rise in pre-tax profit for its 2009/10 year to £505m, thanks to a strong Christmas performance, new product lines and stringent cost and stock controls. The company raised its dividend by 20 per cent to 66p a share. Its shares jumped 4.9 per cent to £21.71.

“Management caution about the macro economic outlook is all pervading but should be seen in the context of Next’s record of calling things too cautiously,” said analysts at Oriel Securities. “We are happy buyers of these shares to £24.”

Much of the sector was spurred higher, given an added boost by retail sales data that showed consumers returned to the shops in February after snow and VAT increases kept them away at the beginning of the year.

FTSE 100 peers Home Retail Group and Marks and Spencer rose 0.8 per cent to 275.6p and 1.7 per cent to 362.4p respectively.

On the FTSE 250 Sports Direct added 2 per cent to 109.7p, DSG International, owner of the Dixons stores, gained 1.8 per cent to 35.3p and Kesa Electricals climbed 1.3 per cent to 127.2p.

Thanks also to gains for banks, oil and mining groups, the FTSE 100 gained 21 points or 0.4 per cent to 5,699.28. Meanwhile, the FTSE 250 was lifted mainly by housebuilders, which continued to get a kick from the stamp-duty news announced in Wednesday’s UK Budget.

Bellway, which also announced better-than-expected earnings on Wednesday rose 1.3 per cent to 769.6p, while Persimmon gained 3.1 per cent to 474p and Barratt Developments climbed 1.7 per cent to 130.7p.

Overall, the mid-cap index gained 70 points or 0.7 per cent to 10,151.72.

United Utilities was lifted 1 per cent to 547p after it revealed in a trading update that low financing costs would help it deliver solid results in the current year.

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ABOUT US:

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We connect investors with investment prospects—cutting through the noise and churn of Wall Street to shine the spotlight on companies on their way up. These companies trade on the Nasdaq, Amex, OTCBB, and Pinksheets.

European stocks drift ahead of bank statements

LONDON – European stock markets fell modestly Thursday as investors awaited the latest policy statements from the European Central Bank and the Bank of England and digested the news that Greece is looking to raise euro5 billion ($6.8 billion) from bond markets to finance its debt.

In Europe, the FTSE 100 index of leading British shares was down 8.72 points, or 0.2 percent, at 5,524.49 while Germany's DAX fell 22.75 points, or 0.4 percent, to 5,795.13. The CAC-40 in France was 6.07 points, or 0.2 percent, lower at 3,836.45.

Though the European Central Bank and the Bank of England are expected to keep their main interest rates on hold at 1 percent and 0.5 percent, investors appear to be treading carefully ahead of their accompanying statements.

In particular, they will be interested to hear what European Central Bank president Jean-Claude Trichet says about the economic outlook for the 16-country eurozone and how monetary policy is being affected by the debt crisis afflicting Greece — figures earlier confirmed that the eurozone economy grew by a tiny 0.1 percent in the last three months of 2009 as the recovery in Germany ground to a halt, Italy started contracting again and the Greek recession worsened.

Despite the anemic economic recovery in the eurozone, Trichet is expected to confirm that special lending measures to banks introduced during the financial crisis will continue to be scaled back.

Analysts think he will confirm that the upcoming auction of 6-month credits on March 31 will be the final operation and that the interest rate charged for shorter-term loans will be increased. The central bank introduced a range of cheap liquidity operations when the financial crisis first exploded to allow the commercial banks to have access to money at a time when the credit markets had seized up.

Regarding the Bank of England, investors will be looking to see if the rate-setting Monetary Policy Committee asks to have its financial asset program extended.

However, with inflation above the Bank's 2 percent target and economic growth higher than previously thought, most analysts doubt an extension will be asked for — the Bank of England bought some 200 billion pounds worth of financial assets from the commercial banks, mainly bonds, to increase the money supply and get them lending again.

"This afternoon's session could be a volatile one, but until all the cards are on the table it seems that no one is willing to show their hand just yet," said Anthony Grech, market strategist at IG Index.

Greece also remains in focus after Greece's Public Debt agency chief said a new 10-year bond was oversubscribed. The government was seeking a maximum of euro5 billion but had bids for euro7 billion within an hour of the book opening.

The sale will be watched closely by financial markets to gauge the depth of Greece's debt crisis. The announcement of the issue comes a day after debt-ridden Greece detailed a whole new round of austerity measures, including salary cuts for civil servants, pension freezes and tax hikes on cigarettes, alcohol, luxury goods and gems.

The bond issue also comes a day before Greek Prime Minister George Papandreou meets with German Chancellor Angela Merkel.

Elsewhere, attention in the markets is slowly turning towards Friday's U.S. nonfarm payrolls report, which often sets the market tone for a while.

Wall Street was poised to open steady following a flat performance on Wednesday — Dow futures were down 1 point at 10,386 while the broader Standard & Poor's 500 futures fell 0.5 point to 1,118.10.

Earlier, stock markets in Asia fell after four days of mostly solid gains.

Japan's Nikkei 225 stock average fell 107.42 points, or 1.1 percent, to 10,145.72.

Hong Kong's Hang Seng dropped 301.01, or 1.4 percent, to 20,575.78 and South Korea's index was down 4.24, or 0.3 percent, to 1,618.20. Shanghai's market dived 2.4 percent as investors took profits ahead of Friday's opening of the national legislature. Uncertainty surrounding new policies expected to be announced during the National People's Congress fostered caution.

Currency markets were largely flat with the euro down 0.1 percent at $1.3677 and the dollar down 0.1 percent at 88.39 yen. The pound hovered just above $1.50.

Meanwhile, oil prices eased modestly after a two-day jump fueled by growing investor optimism that global crude demand is recovering. The benchmark contract was changing hands at $80.52 a barrel, down 35 cents after climbing $1.19 overnight.

Gold Prices Fall Further

LONDON—Spot-gold prices continued falling Friday, trading near three-month lows due to the dollar's rebound amid concerns about the state of euro-zone debt.

Spot gold was recently trading at $1,053.83 an ounce, down 0.8% from Thursday's close. Gold for April delivery on the Comex division of the New York Mercantile Exchange was at $1,054.50 an ounce.