World stocks up ahead of Goldman Sachs earnings

[October 19, 2010]  LONDON (AP) -- Banking stocks helped lift world markets Tuesday ahead of earnings from Goldman Sachs and Bank of America, while the dollar stabilized after U.S. Treasury Secretary Timothy Geithner denied that the Obama administration is looking to devalue the currency to shore up the economy.

In Europe, Germany's DAX was up 12.77 points, or 0.2 percent, at 6,529.40 while the CAC-40 in France was 3.46 points, or 0.1 percent, higher at 3,837.96. Britain's FTSE 100 index of leading British shares was flat at 5,742.52.

Wall Street was poised for a fairly steady opening following solid gains on Monday, when Citigroup Inc. reported better than expected earnings. Dow futures were down 5 points at 11,040 while the broader Standard & Poor's 500 futures fell 2.5 points, or 0.2 percent, at 1,175.50.

Analysts said Wall Street's actual performance will largely hinge on earnings later from Goldman Sachs and Bank of America, both of which are due to report before the bell.

Monday's after-hours earnings from Apple Inc. and IBM Corp. proved to be a mixed bag and have weighed on sentiment. Apple reported a 70 percent rise in global sales in the July-September quarter but cautioned that fourth quarter profit will jump less than analysts expected. And though IBM said its net income rose 12 percent, investors were concerned that new contracts have fallen for a third straight quarter.

The consensus in the markets is that Goldman Sachs earned $2.3 a share in the third quarter of the year and Bank of America made 16 cents a share.

"There are still so many imponderables, particularly concerning the valuation of mortgages, the possible threat of litigation over foreclosures and the generally parlous state of the U.S. housing market," said David Buik, markets analyst at BGC Partners.

Investors will be focusing on more than just the banks -- Coca-Cola, Harley Davidson, Johnson & Johnson, Lockheed Martin and Yahoo! are all scheduled to report earnings later, too.

The heavy corporate news calendar has diverted some investors' attention away from the recent days' biggest topic -- whether the Federal Reserve will be pumping more money into the U.S. economy to shore up growth and prevent prices from actually falling.

That issue will linger, however, particularly as a number of Fed officials are due to speak later, including Chicago Fed President Charles Evans, Atlanta's Dennis Lockhart and Dallas' Richard Fisher.

Their speeches will be viewed in the context of Friday's comments from Fed chairman Ben Bernanke that a case for further easing can be made. However, Bernanke was quiet on the pace and size of any new measures and that has helped support the dollar since -- the prospect of more dollars floating around the system had piled the pressure on the currency itself over the last few weeks, pushing it to nine-month lows against the euro and a 15-year low against the yen.

By midmorning London time, the euro was flat at $1.3941 while the dollar was 0.2 percent higher at 81.38 yen.

Investors will also be monitoring speeches later from European Central Bank president Jean-Claude Trichet and the Bank of England governor to see if they provide some guidance on their respective monetary policies.

Currencies will form the backdrop to this weekend's meeting of finance ministers from the Group of 20 industrialized and developing countries in Korea.

There are worrying signs that the consensual approach that emerged at the height of the financial crisis around two years ago is breaking up as the U.S. and China quarrel over their respective economic policies.

On Monday, U.S. Treasury Secretary Timothy Geithner sought to downplay fears that the two countries are inexorably heading towards a currency war, saying that no country "can devalue its way to prosperity."

Those comments to business leaders in Silicon Valley in California helped support the dollar.

"Geithner's promise not to pursue dollar devaluation provided quite pronounced relief for the currency," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole.

Earlier, Japan's benchmark Nikkei 225 stock index gained 0.4 percent to 9,539.45 as the yen dropped modestly against the dollar to the relief of the country's exporting base.

South Korea's Kospi slipped 1.0 percent to 1,857.32 while Australia's S&P/ASX 200 rose 0.1 percent at 4,655.70. Elsewhere, Hong Kong's Hang Seng index rose 1.1 percent to 23,726.07.

The Shanghai Composite Index jumped 1.6 percent to 3,001.85 on investor optimism that the government will boost spending in sectors such as biotech and alternative energy as part of the country's economic strategy for the next five years.

Benchmark oil for November delivery was down 31 cents to $82.77 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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