World markets steady as rally runs out of steam

[July 28, 2009]  LONDON (AP) -- World stock markets mostly traded in a narrow range Tuesday after a mixed batch of corporate earnings and as investors became increasingly reluctant to extend a two-week rally.

In Europe, Germany's DAX was down 3.15 points, or 0.1 percent, at 5,248.40 while France's CAC-40 rose 9.12 points, or 0.3 percent, at 3,381.48. The FTSE 100 index of leading British shares was down 7.89 points, or 0.2 percent, 4,578.24. If the FTSE closes higher then it will be its 12th straight day of gains -- a new record for the index.

Earlier in Asia, most markets closed higher, though Tokyo's Nikkei 225 stock average fell a minuscule 1.4 points to 10,087.26. Hong Kong's Hang Seng outperformed its regional counterparts, closing up 372.92 points, or 1.8 percent, at 20,624.54

Stocks have rallied strongly over the last couple of weeks after better than expected U.S. earnings pushed many of the world's leading indexes to 2009 highs amid hopes that the worst of the recession was over. Equities usually rally around 6-9 months before actual economic growth emerges.

While most of the focus has centered on U.S. earnings, the European reporting season has kicked into gear this week, providing investors with crucial insight about whether the recession is easing as much as it apparently is in the U.S.

So far, the evidence has been mixed.

Deutsche Bank AG fell over 7 percent, making it the biggest faller on Germany's DAX, after it booked big credit loan losses despite a 67 percent rise in second quarter net profit. But EADS NV topped France's CAC-40 -- rising by over 5 percent -- after it said it still plans to deliver as many Airbus planes as last year alongside a 76 percent increase in second quarter net profit.

Meanwhile, BP PLC, Europe's second biggest oil company, saw its share price fall over 1 percent after in-line second quarter results prompted a bout of profit-taking -- BP has performed particularly well in the last month in the run-up to the results.

Earnings will continue to dominate sentiment in Europe over the rest of the week. Among other steelmaker Arcelor Mittal, carmaker Daimler AG, chemical company BASF SA, France Telecom SA and Royal Dutch Petroleum will report.

"If these earnings results do continue to show improvement then many investors who have been on the sidelines so far may well decide the time is right to get involved," said Robert Pike, head trader at Spreadex.

It's a quieter week in the U.S. though there will be interest in earnings from media company Time Warner Inc., Dow Chemical Co., Colgate-Palmolive Co, Walt Disney Co. and ExxonMobil Corp.

Analysts said it was unsurprising that stocks are largely treading water at the moment and that trading volumes are exceptionally low, partly because of the traditional summer lull when investors decamp on vacation. As a result, a bout of profit-taking is anticipated, especially as many of the world's major indexes have pushed through 2009 highs.

"The important aspect to the general stock market recovery will be just how big any sell off will prove to be," said Jimmy Yates, head of equities at CMC Markets.

"If we can leave some higher levels still in touching distance then more strength could well see us in a position to answer the question, are we in a bull market or still the bear market rally," he added.

Wall Street was poised to open lower later. Dow futures were down 10 points, or 0.1 percent, at 9,060 while the broader Standard & Poor's 500 futures fell 1.8 points, or 0.2 percent, to 978.10.

Elsewhere in Asia, markets in Shanghai and Seoul recouped their losses to finish higher by 0.1 percent.

Australia's index gained 0.7 percent and India's Sensex was up 0.2 percent.

Oil prices rose modestly, with benchmark crude for September delivery up 6 cents to $68.44 a barrel. On Monday, the contract rose 33 cents.

The dollar fell 0.7 percent to 94.53 yen, while the euro rose 0.2 percent to $1.4275.

[Associated Press; By PAN PYLAS]

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

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