Global stocks’ tone remains positive on solid US earnings

The positive tone in markets continued on Wednesday, a day after investors were cheered by a run of strong US corporate earnings and rising hopes of an interest rate cut from the European Central Bank.

By Pan Pylas (AP)

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Published: Thu 25 Apr 2013, 10:32 PM

Last updated: Sat 4 Apr 2015, 7:50 AM

Another weak business survey for Germany, Europe’s biggest economy, reinforced the expectations that the ECB will reduce borrowing costs again at its policy meeting next Thursday.

The Ifo Institute said its main index of business optimism fell to 104.4 points from 106.7 in March. Market analysts had expected a more modest decline to 106.2.

“IFO data from Germany today repeats this observation, but rate cut forecasts now look to be baked in to current prices,” said Chris Beauchamp, market analyst at IG.

Because expectations of rate cuts are largely priced in now, the response in markets has been muted compared with the sharp gains made Tuesday.

People stand in front of a share price board at the Tokyo Stock Exchange on Wednesday. Japan’s Nikkei 225 index jumped 2.3 per cent to close at 13,843.46, its highest close since June 2008. — AFP

Germany’s DAX rose 0.4 per cent to 7,687 while the CAC-40 in France was 0.6 per cent higher at 3,806. Meanwhile, the FTSE 100 index of leading British shares was up 0.3 per cent at 6,421 — Britain doesn’t use the euro so it isn’t directly affected by developments with regard to the ECB, which controls monetary policy for the 17 European Union countries that use the euro.

European markets have also been buoyed in recent days by progress in Italy to produce a government after inconclusive elections in February. The president was reelected over the weekend and on Wednesday he was expected to ask a center-left politician, Enrico Letta, to form a new executive government.

Wall Street was poised for a solid opening after its advance Tuesday — Dow futures and the broader S&P 500 futures were both up 0.2 per cent.

Once again the focus in the U.S. will likely remain on earnings after a stream of positive news on Tuesday from the likes of Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet. In an after-hours statement, Apple said it will distribute $100 billion in cash to its shareholders by the end of 2015, a move that helped ease concerns over a fall in profits and a fairly cautious outlook statement.

“Generally speaking, the earnings season thus far has been characterised by better than expected earnings but for revenue to be coming in slightly below expectations,” said Gary Jenkins, managing director of Swordfish Research. “Apple reported last night and whilst the results were slightly better than the recently marked down expectations, they did warn that revenues for this quarter would be below estimates.”

Later, consumer goods giant Procter & Gamble, drug maker Eli Lilly and Boeing will release earnings. Earlier in Asia, stocks rallied in the wake of the big gains recorded in Europe and the U.S. the previous day. Japan’s Nikkei 225 index jumped 2.3 per cent to close at 13,843.46, its highest close since June 2008, while South Korea’s Kospi rose 0.9 per cent to 1,935.31.

Hong Kong and mainland Chinese stocks also climbed on expectations that the central government might take action to boost the Chinese economy after recent data showed growth lagging in the world’s No. 2 economy.

Hong Kong’s Hang Seng advanced 1.7 per cent to 22,183.05. Mainland Chinese shares bounced back a day after sharp drops. The Shanghai Composite Index rose 1.6 per cent to 2,218.32 and the Shenzhen Composite Index gained 2.2 per cent to 943.78.

The currency markets were relatively subdued, with the euro 0.1 per cent higher at $1.3011 and the dollar steady at 99.50 yen.

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