World markets rise on Goldman Sachs earnings

[April 14, 2009]  LONDON (AP) -- World stock markets rose Tuesday after surprisingly strong earnings from U.S. investment bank Goldman Sachs fueled hopes that the global banking system may be over the worst.

As well as reporting a better-than-expected profit of $1.66 billion for the first quarter, Goldman Sachs said it was looking to raise $5 billion via a rights issue to help pay back the $10 billion it took from the U.S. government last autumn from the Troubled Asset Relief Program (TARP).

"The market received a fillip which it wasn't really expecting in the form of Goldman Sachs' brilliant quarterly numbers, posted a day early," said David Buik, senior strategist at BGC Partners.

"It wasn't so much the profit that gave the market cheer, it was the fact that independence from TARP was at the top of their list of priorities," said Buik.

European investors were impressed by Goldman's push to repay the U.S. taxpayer as they returned from the long Easter weekend -- banking stocks were doing particularly well.

The FTSE 100 index of leading British shares was up 49.21 points, or 1.2 percent, at 4,032.92 while Germany's DAX rose 75.65 points, or 1.7 percent, to 4,566.77. The CAC-40 in France was 48.99 points, or 1.7 percent, higher at 3,023.17.

In London, Barclays PLC was up 12 percent, while Lloyds Banking Group PLC, itself majority-owned by the British government, rose 9 percent. In Frankfurt, Commerzbank AG rose 14 percent and Deutsche Bank AG, Germany's biggest bank, was up 6 percent. Meanwhile in Paris, both BNP Paribas SA and Societe Generale SA rose 9 percent.

Goldman Sachs appears to have set the bar high for the other big U.S. banks due to report earnings this week. JPMorgan Chase & Co. and Citigroup Inc. are just two of the banks awaited.

"There would need to be a significant negative surprise to shake current sentiment. Indeed, there is a good likelihood that we will actually get some resolution of uncertainties in the market thereby increasing risk appetite," said Hans Redeker, an analyst at BNP Paribas.

That improvement in risk appetite has become more and more apparent over the last month or so as stock markets around the world have rallied from multiyear lows, and some are actually showing gains for 2009.

Equity markets usually start rallying around 6-9 months before an actual economic recovery begins. Hopes that the global recession could be over by the end of the year have been stoked in recent weeks by some better than expected economic news.

However, investors are fully aware that the world economy is not in the clear yet.

Asian markets overnight were hit by the news that Singapore's economy contracted by a record 20 percent in the first quarter as demand for Asia's exports evaporated. And in Australia, the country's flagship carrier Qantas Airways slashed its annual profit forecast and said it would cut up to 5 percent of its workforce -- its shares slumped 9 percent.

Despite Quantas' problems, Australia's index returned from holiday with a 2.2 percent rise, though that was dwarfed by the gains in Hong Kong, which also returned following a two-day closure. The Hang Seng closed 678.75 points, or 4.6 percent, higher at 15,580.16.

But Tokyo's benchmark Nikkei 225 stock average lost 81.75 points, or 0.9 percent, to 8,842.68 as automakers skidded amid growing concern about the fate of ailing GM. Mazda tumbled 8.7 percent and Toyota fell 3.6 percent.

That ongoing unease is expected to dominate sentiment later when Wall Street opens. Dow futures were up only 14 points, or 0.2 percent, to 8,009 while S&P 500 futures were unchanged at 854.

"A number of investors are pretty sidelined during the earnings season and watching how the results play out before going either way, particularly since the market has risen so much already," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore.

Oil prices pushed back up above $50 a barrel, with benchmark crude for May delivery up 89 cents at $49.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Monday dropped $2.19 to settle at $50.05.

In currencies, the dollar fell to 99.87 yen from 100.34 yen, while the euro dropped rose to $1.3279 to $1.3277.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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