Upbeat corporate earnings lift European stocks

[August 06, 2009]  LONDON (AP) -- World stock markets mostly rose Thursday after another batch of solid corporate earnings, as investors awaited the outcome of key European Central Bank and Bank of England meetings.

In Europe, stocks bounced back after two days of losses following some downbeat economic news in the U.S., with the FTSE 100 index of leading British shares up 50.11 points, or 1.1 percent, at 4,697.24 and Germany's DAX 34.77 points, or 0.7 percent, higher at 5,387.78. The CAC-40 in France rose 31.72 points, or 0.9 percent, t0 3,490.25.

"The trend is still definitely up but the big question is how sustainable is this rally and the signs over the last couple of days are that economic doubts are creeping back to the fore, but the market keeps shrugging off any negative news," said Ian Horsley, indices trader at Spreadex.

Financial stocks were particularly in demand in London. Royal Bank of Scotland Group PLC, which is majority-owned by the British government, was up nearly 8 percent ahead of Friday's half-year results, while Lloyds Banking Group PLC rose 6 percent on further buying following on from Wednesday's 11 percent increase.

Insurer Aviva PLC was also heavily bought up, rising 6 percent, after it posted better than expected first half results and announced plans to float off part of its Dutch subsidiary to shore up its capital base.

And Anglo-Dutch consumer products firm Unilever PLC/NV rose 5 percent in London after reporting a second-quarter sales increase despite the global recession.

German airline Deutsche Lufthansa AG was the best performing stock on the DAX, rising by 4 percent, after Air Berlin, the country's second biggest airline said it managed to offset the financial impact of falling passenger numbers by taking a knife to capacity.

Meanwhile, Germany reinsurer Hannover Re AG saw its share price rise around 4 percent after it revealed that second-quarter net profit doubled as demand increased for its products, particularly life and health reinsurance.

And in France, financial company Dexia SA topped the CAC's risers with a 7 percent advance as investors warmed to the general positive vibe surrounding bank and insurance companies across the continent.

Though the corporate backdrop was largely favorable, investors remained cautious ahead of meetings at the Bank of England and the European Central Bank. Because both central banks are set to keep their benchmark rates unchanged at 0.5 percent and 1 percent respectively, more interest will be on what they say about alternative measures to boost the quantity of money in their respective economies.

While the European Central Bank is unlikely to change course and pursue a more aggressive strategy, the Bank of England may well decide that it has already pumped more than enough money into the economy, especially as another monthly survey on Wednesday showed the British services sector is growing strongly.

Most interest in the markets this week will be on Friday's U.S. jobs report for July, which often sets the tone in the markets for a few weeks. Unemployment stands at a 26-year high of 9.5 percent and is expected to eventually top 10 percent. Investors are looking for the pace of layoffs to slow so the economy can heal.

As a result, the weekly jobless claims figures in the U.S. later have the potential to soothe nerves over the payrolls figures after some weaker than anticipated data on Wednesday.

"A better number here could cheer the market, raising investor optimism ahead of the jobs report," said Ian Griffiths, a dealer at CMC Markets.

Futures markets were predicting a fairly subdued start later, with Dow futures up only 12 points, or 0.1 percent, at 9,257 and the broader Standard & Poor's 500 fugures 0.6 point, or 0.1 percent, firmer at 1,001.40.

Earlier in Asia, a bounceback in auto stocks, such as Honda Motor Co. and Toyota Motor Corp. helped Japan's Nikkei 225 stock average close 135.56 points, or 1.3 percent, higher at 10,388.09. Hong Kong's Hang Seng index recovered from early declines to gain 404.47, or 2 percent, to 20,899.24.

Bucking the trend were shares in China. The benchmark Shanghai Composite Index dropped 72.17 points, or 2.1 percent, to 3,356.33. Worries have grown over whether a surge in Chinese bank lending to support the government's massive stimulus Elsewhere, Australia's benchmark gained 1.5 percent after the unemployment rate held steady in July while South Korea's Kospi erased earlier losses and closed up 0.4 percent. Singapore's market also turned higher to rise 0.3 percent.

Oil prices recovered losses to rise above $72 a barrel in Asia after investors digested rising U.S. crude inventories and signs of a weak economy.

Benchmark crude for September delivery was up 13 cents to $72.10 a barrel in electronic trading on the New York Mercantile Exchange.

The dollar rose 0.4 percent to 95.28 yen while the euro was flat at $1.44.

[Associated Press; By PAN PYLAS]

AP Business Writer Kelly Olsen in Se0ul contributed to this report.

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