World stocks jump as earnings please, Fed ahead

LONDON - World stocks climbed solidly for the third day in a row on Wednesday after reassuring corporate results on Wall Street while a Federal Reserve meeting later in the day was eyed for possible new actions on the credit crisis.

By (Reuters)

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Published: Wed 28 Jan 2009, 7:48 PM

Last updated: Thu 2 Apr 2015, 4:34 AM

Wall Street looked set for a sharply higher start, but with a large tranche of new earnings reports ahead.

The dollar was generally weaker against most currencies, with Britain’s battered pound recovering 1 percent.

European shares were up strongly with the FTSEurofirst 300 index gaining 2 percent, driven higher by banking and energy stocks. Japan’s Nikkei gained 0.56 percent, a day after jumping 4.9 percent.

The main driver was a series of modestly positive earnings results from Wall Street overnight.

American Express, for example, posted a quarterly profit that surpassed analysts’ forecasts and chip maker Texas Instruments’ quarterly profit fell less than feared.

“Yahoo had in-line sales after the close in the U.S. and a lot of other companies’ results have not been as bad as expected which is probably creating a more positive atmosphere,” said Bernard McAlinden, market strategist at NCB Stockbrokers in London.

European markets were also supported by reports showing surprising resilience among consumers. In France, a survey showed consumer confidence rose in January to its strongest since April last year; in Germany, market research group GfK’s forward-looking sentiment gauge showed morale should hold steady in February.

Earnings disappointments, however, remain a major concern risk for investors. Swiss wealth manager Sarasin said on Wednesday that global estimates still need to fall by 10 percent to 20 percent.

“Most companies are going to deliver results that will be even worse than the estimates which have already been significantly downgraded,” it said in a note.

But Sarasin also forecast rises in U.S. and European stock market indexes of 25 percent to 30 percent by year-end.

Fed meets

The Fed’s meeting was also in focus. On Tuesday, the U.S. central bank took a step toward easing mortgage foreclosures, announcing it would write down troubled mortgages to keep people in their homes.

The Fed concludes a two-day policy meeting later in the day and with the benchmark interest rate already near zero, the market is looking for any new policy measures, such as purchasing long-dated Treasuries.

“If the Fed makes comments on purchasing Treasuries, it would soothe concerns that overseas investors may start picking up fewer U.S. bonds,” said Hideki Hayashi, chief economist at Shinko Securities.

The euro rose 0.7 percent against the dollar to $1.3269 and by 1 percent versus the yen to 118.38 yen. The dollar also gained 0.3 percent against the yen to 89.20 yen.

Britain’s pound continued to recover versus the dollar after its slump to a 23-year low last week, rising 1 percent to a one-week high of $1.4302.

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