Earnings give world markets another positive boost

[July 30, 2009]  LONDON (AP) -- Global stock markets rose Thursday after another batch of better than expected corporate earnings and amid further signs that Japan, the world's second-largest economy, is on the road to recovery.

In Europe, the FTSE 100 index of leading British shares was up 44.02 points, or 1 percent, at 4,591.55 while Germany's DAX rose 41.19 points, or 0.8 percent, to 5,311.51. The CAC-40 in France was 27.96 points, or 0.8 percent, higher at 3,393.58.

Earlier in Asia, Hong Kong's Hang Seng edged up 98.58, or 0.5 percent, to 20,234.08, while Japan's Nikkei 225 stock average rose 51.97, or 0.5 percent, to 10,165.21.

Corporate earnings out of Asia and Europe have generally echoed the theme that came out of the U.S. over the previous two to three weeks -- that businesses around the world have weathered the economic recession better than anticipated. It's that hope that the worst of the recession is over that fueled the stock market rally around the world this month.

In Japan, major carmakers like Nissan Motor Co. and Honda Motor Co. jumped 11.1 percent and 8.2 percent respectively on stronger-than-expected earnings.

Meanwhile, on a bumper results day in Europe, British telecommunications company BT Group PLC and its French peer Alcatel-Lucent SA were heavily in demand after they also unveiled better than expected second-quarter earnings.

BT was the biggest riser on the FTSE, up 12.7 percent, while Alcatel rose 7.7 percent, making it the second-biggest riser on the CAC, behind Cap Gemini SA, Europe's largest computer consultancy, which spiked nearly 8 percent after indicating that activity was stabilizing.

Rolls-Royce PLC, the aircraft engine manufacturer, also saw its share price surge 8 percent after it said it was on track to meet full-year targets after posting a 9 percent increase in first-half pretax profit.

It wasn't all good news though. Anglo-Dutch publishing group Reed Elsevier PLC slumped 14.4 percent after surprisingly announcing that it was issuing just under 10 percent of share capital to pay down its $8.4 billion debt burden.

German chemical company BASF SE saw its share price slide 4.8 percent, making it the biggest faller on the DAX, after it warned of a significant drop in sales and earnings this year even after it reported a 74 percent slump in second-quarter net profit.

And earnings from carmaker Renault SA did not excite as much as those from rival SA Peugeot-Citroen in the previous day. It was the biggest faller on the CAC, falling by 3.6 percent.

Elsewhere in Asia, Shanghai's benchmark added 1.7 percent to 3,321.56 after China's central bank promised to maintain a "relaxed monetary policy" and to use market tools rather than administrative controls to regulate credit growth. On Wednesday, Chinese stocks slid 5 percent as investors panicked that the monetary authorities were looking at reining in bank lending.

China and other developing markets have surged this year -- China and India are up nearly 80 percent and 60 percent, respectively -- on hopes they can help buoy the world economy at a time when Western countries are reeling from recession.

But much of their advance has been driven by liquidity brought on by easier monetary controls and government stimulus, something analysts worry can camouflage lingering problems in the economy.

Neil Mackinnon, chief economist at ECU Group, warned that there are "certainly bubble-type" elements to the behavior of the Chinese market and that poses challenges for policy-makers.

"Global investors will be monitoring this carefully....the Chinese equity market has tended to lead developments in global equity markets," he said.

The region was also buoyed by news that industrial production in Japan rose 2.4 percent in June from the month before. The fourth straight rise raised hopes that the world's second largest economy could soon be growing again as global trade picks up.

"Signs that we may be coming to the end of the recession came back to us again last night as Japan's industrial production numbers showed an improvement," said Jimmy Yates, head of equities at CMC Markets.

Elsewhere in Asia, South Korea's Kospi gained 0.7 percent, Australia's index advanced 1.2 percent and Singapore's market was up 0.5 percent.

U.S. stocks were expected to open modestly higher later. Dow futures were up 58 points, or 0.6 percent, at 9,105 while the broader Standard & Poor's 500 futures rose 7.2 points, or 0.7 percent, at 982.10.

Oil prices traded in a narrow range after sliding around 6 percent Wednesday on news of bigger than anticipated U.S. stock levels. Benchmark crude for September delivery was down 3 cents at $63.32 a barrel.

The dollar was down 0.1 percent at 94.98 yen while the euro rose 0.3 percent to $1.4072.

[Associated Press; By PAN PYLAS]

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

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.