World stocks up after US bank test; jobs data eyed

[May 08, 2009]  LONDON (AP) -- World stocks rose Friday as investors braced for a key U.S. jobs report that could bolster -- or undercut -- a growing belief that recession in the world's largest economy is starting to ease.

Results from the U.S. government's long-awaited bank "stress tests" also proved to be roughly within expectations, lifting uncertainty over the market and supporting equities.

In morning trading in Europe, Britain's FTSE 100 was up 1.4 percent to 4,458.23, Germany's DAX added 2.5 percent to 4,922.24, and France's CAC 40 grew 2 percent to 3,316.05.

Wall Street was set to open higher. Dow Jones industrial average futures climbed 1 percent to 8,467 and Standard & Poor's 500 futures were 1.1 percent higher at 917.10.

Shares across Asia recovered from lows after the announcement of the U.S. stress tests.

A two-month surge in global markets has gained paced over the last week as signs of a pulse in economies, industries and companies worldwide continue to feed hopes of a year-end recovery.

Investors will be eyeing Friday's U.S. April jobs survey -- regarded by Wall Street as the most important economic indicator each month -- for any evidence of that rebound. Analysts expect the jobless rate will climb to 8.9 percent from the current 25-year high of 8.5 percent. Many experts expect the jobless rate to hit 10 percent by the end of this year.

However, some optimism ahead of the data release was stoked by the ADP payrolls firm, which estimated Wednesday that only 491,000 jobs were lost in April in the U.S. -- the lowest since November.

"There is this growing anticipation after the ADP release on Wednesday that we're going to see a pretty healthy reading on the job report later today," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald. He said a healthy reading would be indicated by the jobless rate rising less quickly than in previous months.

In Europe and Asia, financials advanced after the Obama administration's tests of major banks showed nine of the 19 biggest lenders have enough capital to endure a deeper recession, but 10 must raise a total of $75 billion in new capital to withstand possible future losses.

The results, which analysts say showed the U.S. banking sector is vulnerable but viable, were largely in line with the trickle of reports leaked days before.

"The stress test results only indicated 10 needed money but no one is in such a bad state they face extreme difficulties," said Pope.

Deutsche Bank shares added 4 percent and BNP Paribas 3.7 percent.

Shares in Royal Bank of Scotland Group jumped by as much as 15 percent after it reported a first quarter loss of 857 million pounds ($1.29 billion), which was not as bad as some investors feared. The bank made significant write-offs and warned the next two years would be difficult, but still saw a jump in revenues.

The apparent frankness about the scale of the bank's difficulties played well in the market, said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

"Trust is a big feature in the banking sector at the moment. Anything that reinforces trust is well received," he said.

Similarly, Germany's Commerzbank AG rose nearly 4 percent after it reported a first quarter loss of euro861 million ($991 million) as it made provisions for bad loans and investments. However, net interest income, one measure of revenue, was up 70 percent to euro1.7 billion from just over euro1 billion a year earlier.

In Japan, the benchmark Nikkei 225 stock average gained 47.13 points, or 0.5 percent, to 9,432.83, setting a fresh six-month high. Hong Kong's Hang Seng closed up 171.98 points, or 1 percent, to 17389.87.

South Korea's Kospi climbed 0.8 percent to 1,412.13, while Shanghai's main index rose 1.1 percent and Australia's index ended almost flat.

Among stocks, Toyota Motor finished down 1.5 percent before announcing its worst result ever. The world's biggest carmaker said it lost a bigger-than-expected 436.94 billion yen ($4.4 billion) in the fiscal year and forecast more severe losses.

However, financial issues again made big strides, with Japanese lenders shares particularly strong. Mitsubishi UFJ Financial Group gained 6.2 percent and Mizuho Financial Group rose 6 percent in Tokyo.

Wall Street was cautious and finished lower Thursday ahead of the stress tests announcement, with sentiment also hurt by news of weak demand at a Treasury bond auction. That raised concerns about the government's ability to raise funds to fight the recession.

The Dow Jones industrial average fell 1.2 percent to 8,409.85. The S&P 500 index fell 1.3 percent to 907.39.

Oil prices rose Friday, with benchmark crude for June delivery up 88 cents to $57.59 in European trading. On Thursday, the contract rose as high as $58.57 a barrel, a six-month high, before settling up 32 cents at $56.47.

[Associated Press; By LOUISE WATT]

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

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