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Upbeat earnings lift stocks but Greek anxiety hits euro

German business sentiment offsets worries on possible Greek default

London — World stocks climbed back towards all-time highs on Tuesday as upbeat European earnings helped offset a mixed German business confidence survey and rising worries about a possible Greek default on its bailout loans.

European trading was strong with the pan-regional FTSEurofirst 300 up 0.65 per cent and Wall Street expected to open higher, after a 1.4 per cent jump by the Nikkei and 2 to 2.5 per cent rises in China’s main markets had lifted Asia overnight.

Publicis, Sky, ARM Holdings were all up more than four per cent after reporting results, with the overall picture of a weaker euro and improving economic conditions — driven by the European Central Bank’s (ECB) bond-buying programme — drawing investment flows into equity markets.

Germany’s closely-watched ZEW business confidence indicator dented the gains slightly as ‘sentiment’ saw its first dip in six months, though a bumper ‘current conditions’ reading helped cushion the disappointment.

“In macro terms at least, the worst of the crisis looks like it is over for the eurozone and certainly my own ‘misery indices’ are looking less bad,” said Neil Williams, chief economist at fund manager Hermes in London.

Greece remained on investors’ radar with media reports that the ECB was considering upping the haircuts it applies to Greek assets used as collateral for its cheap funding. The euro was hovering at $1.0682 by 1200 GMT, well off Friday’s peak of $1.0849, while Greece’s 2-year bond yields were closing in on 30 per cent and benchmark 10-year yields rose to 13.58 per cent.

An unprecedented debt default in the currency bloc could open the way for Greece to exit the euro. Nevertheless investors would rather not have to deal with the uncertainty it would create.

US markets were focused largely on first quarter earnings. IBM shares were up 0.7 per cent in premarket trading after its earnings exceeded low expectations, while chemical conglomerate DuPont fell 1.6 per cent after it said the stronger dollar would eat into profits. Underscoring the point, the dollar pushed up for a third straight day, trading at 98.385 against a currency basket. It is now roughly 23 per cent higher than it was a year ago.

Moving in the opposite direction, the Australian dollar tumbled to $0.7685 from $0.7723 after the minutes of the Reserve Bank of Australia’s (RBA) April meeting showed rate cuts were on the table at the bank.

Oil and gold prices also fell back as the dollar strengthened. Brent dipped to $62.90 per barrel and US crude eased to $55.94, not far from last week’s four-month high of $57.42.

Spot gold was $1,201.63 an ounce at 1202 GMT, up 0.5 per cent. US gold futures for June delivery were up $7.70 an ounce at $1,201.40.

The S&P BSE Sensex decreased 0.8 per cent to 27,676.04, the lowest close since March 27. The measure retreated 1.5 per cent last week after Tata Consultancy Services Ltd, the country’s most valuable company, on Thursday reported a drop in quarterly profit. Sensex companies’ earnings-per-share will probably fall for a second straight quarter.