CIT rescue reports give markets another boost

[July 20, 2009]  LONDON (AP) -- World stock markets advanced again Monday as already upbeat investors welcomed reports that U.S. commercial lender CIT Group Inc. is close to securing enough funding to avoid filing for bankruptcy protection from creditors.

European shares followed Asia higher, with the FTSE 100 index of leading British shares up 73.37 points, or 1.7 percent, at 4,462.12 while Germany's DAX rose 81.36 points, or 1.6 percent, to 5,059.76. The CAC-40 in France was 51.04 points, or 1.6 percent, higher at 3,269.50.

The main talking point in the markets Monday was the future of CIT, which last week came close to bankruptcy when the Obama administration balked at bailing it out. The news that the ailing lender has approved a deal with bondholders for $3 billion in emergency funding has pushed Wall Street futures higher. Dow futures were up 61 points, or 0.7 percent, at 8,758 while the broader Standard & Poor's 500 futures rose 7 points, or 0.8 percent, to 943.90.

The CIT news further fuels optimism from last week, when a run of stronger than anticipated U.S. second-quarter earnings -- particularly from the country's biggest banks -- helped stocks around the world enjoy big gains.

Attention will once again be on the U.S. earnings -- among those to report include financial services and travel company American Express Co., aircraft maker Boeing Co. and heavy machinery firm Caterpillar Inc.

The reporting season also kicks into gear in Europe, with pharmaceuticals company GlaxoSmithkline PLC, mobile phone operator Vodafone PLC, Swiss bank Credit Suisse AG and French foods company Danone SA.

"So far, earnings have been fairly good and we guess that this positive trend will continue," said David Keeble, an analyst at Calyon Credit Agricole.

Investors will also be looking this week to Washington for direction when U.S. Federal Reserve Chairman Ben Bernanke makes his half-yearly testimony to Congress Tuesday and Wednesday. A key concern for investors is how the central blank plans to eventually undo extraordinary emergency measures taken as the financial crisis deepened. Those include cutting interest rates to near zero and buying up government securities.

"Investors will be looking for the tone his statements set for the markets," said Arifa Sheikh-Usmani, an equities trader at Spreadex Ltd.

Investors remained wary of assuming gains will continue, as the March to June advance was predicated on similar hopes that the worst of the recession had passed.

Neil Mackinnon, chief economist at ECU Group, noted that the S&P index seemed "a little tired" towards the end of last week and the index did not have the strength to take out the June high of 956.

"So this week's price action will be interesting," he said.

Earlier in Asia, Hong Kong's Hang Seng jumped 696.71 points, or 3.7 percent, to 19,502.37 and South Korea's Kospi added 38.41, or 2.7 percent, to 1,478.51. Most other major markets were also higher with Shanghai's benchmark rising 2.4 percent. Australian, Taiwan and Singapore shares were up 1 percent or more.

Indonesia's market was closed for a public holiday. It fell Friday after deadly bomb blasts at two luxury hotels in the capital Jakarta. Japanese financial markets were closed for a holiday.

Crude prices bounced in line with buoyant stock markets, with the benchmark contract rising $1.10 to $64.66 a barrel. The contract advanced $1.54 in Friday trade.

The dollar was 0.3 percent higher at 94.62 yen while the euro was up 0.8 percent at $1.4226.

In recent week's the dollar's fortunes against the euro have fluctuated inversely with stocks.

When risk appetite has been elevated, stocks have rallied and the dollar has dropped. Conversely, when shares have fallen, the dollar has tended to rise as it is widely considered a safe haven asset despite all the problems afflicting the U.S. economy.

[Associated Press; By PAN PYLAS]

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

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