European stocks recoup losses as Wall Street futures turn higher on more upbeat earnings news

By Pan Pylas, AP
Thursday, July 23, 2009

European stocks recoup losses on Wall Street hopes

LONDON — European stock markets recouped earlier losses Thursday as Wall Street futures turned higher on another batch of stronger than expected corporate earnings and hopes of an improvement in a closely-watched U.S. housing report.

In Europe, the FTSE index of leading British shares was down 2.57 points, or 0.1 percent, at 4,491.16 — after eight days of gains, the longest since an 11-day advance in December 2003 — while Germany’s DAX was down a bare 1.62 points to 5,119.94. The CAC-40 in France was 3.50 points, or 0.2 percent, lower at 3,301.57. All three indexes are trading above where they started 2009 and near their highs for the year.

Wall Street was poised for another solid opening later with Dow futures up 38 points, or 0.4 percent, at 8,871 and the broader Standard & Poor’s 500 futures 5.4 points, or 0.6 percent, higher at 954.80.

Expectations of further gains on Wall Street arose after better than expected earnings from Ebay Inc., the pioneer of online auctions, AT&T Inc., the biggest telecommunications company in the U.S. and carmaker Ford Motor Co.

Markets around the world have rallied for over a week on strong U.S. corporate earnings reports from a range of companies, including heavy equipment maker Caterpillar Inc., Apple Inc. and Coca Cola Inc.

The catalyst to the advance were the U.S. banks, particularly Goldman Sachs Group Inc., but Wells Fargo & Co. and Morgan Stanley Co. provided investors a timely reminder Wednesday of the major problems still facing the industry particularly in the commercial property market.

“Earnings releases continue to impress, although the financials are becoming more mixed,” said Gareth Berry, an analyst at UBS. “With one-fifth of S&P 500 constituents having already reported, 82 percent have beaten expectations.”

There will be more U.S. earnings later, most notably from online retailer Amazon Inc., American Express Co., McDonalds Corp. and Microsoft Corp., as well as monthly existing home sales figures from the National Association of Realtors.

Most of the focus over the recent trading sessions has centered on earnings coming out of the United States. However, the European reporting season is slowly kicking into gear to, providing investors with crucial insights about whether the recession is easing as much as it apparently is in the U.S.

Thursday saw a slew of earnings in Europe, particularly in Switzerland where upbeat comments from pharmaceuticals company Roche Holding AG and engineering company ABB Ltd helped their share prices rally by around 3 percent in morning trading. The share price of Credit Suisse AG, one of the country’s two heavyweight banks, was broadly unchanged after it reported in-line earnings.

Nevertheless, the recession in Europe continues to take its toll on a number of companies. Europe’s biggest home improvement company Kingfisher PLC reported a 1.9 percent decline in same-store sales in the ten weeks to July 11 largely because of a slowdown in housing starts, particularly in France. Kingfisher shares were down 2 percent.

Meanwhile, Compass PLC, the world’s biggest caterer, reported worse than expected sales and the company’s share price was the biggest faller on the FTSE 100 index, down around 8 percent.

Despite the ongoing strength in equity markets, investors remained wary, as the March to June rally was predicated on similar hopes about the state of the world economy.

“The succession of good earnings news over the last ten days in particular has kept risk supported and contributed to further gains, but momentum is beginning to look overstretched,” said UBS’ Berry.

Earlier in Asia, the recent rally continued with Japan’s Nikkei 225 stock average closing up 69.78 points, or 0.7 percent, to 9,792.94 after better than expected export figures, while Hong Kong’s Hang Seng jumped 569.53, or 3 percent, to 19,817.70.

Elsewhere in Asia, South Korea’s Kospi closed up 0.2 percent, while mainland China’s Shanghai index added 1 percent. Australian shares, down 0.1 percent, were among the few losing markets.

Oil prices moved in a tight range, with benchmark crude for September delivery down 20 cents at $65.20 a barrel in electronic trading on the New York Mercantile Exchange.

The dollar rose 0.8 percent to 94.38 yen while the euro was up 0.2 percent at $1.4228.


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

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