European stocks up as corporate news offset worries about drop in German sentiment

By Colleen Barry, AP
Tuesday, June 15, 2010

European stocks rise amid upbeat corporate news

MILAN — World stocks edged up Tuesday as markets looked past a drop in German investor sentiment and clung to positive corporate news and a gain in the euro.

German investor confidence fell sharply in June on worries about the persistent debt crisis in the 16 countries that share the euro as well as the impact of spending cuts by European governments, according to a survey by the ZEW institute.

The index sank to 28.7 points in June from 45.8 in May, its lowest level in more than a year.

But analysts at BNP Paribas warned against putting too much importance on the index’s decline. “The index is based on an analyst survey and hence heavily influenced by recent capital market developments,” the analysts said in a note.

Despite the news, coming on the heels of Moody’s downgrade of Greek debt, European indexes rallied after opening lower. Analysts said much of the impact of the Moody’s downgrade had already been priced in, even if it put the spotlight back on Europe’s peripheral economies.

After opening down, European stocks reversed and pushed higher. Britain’s FTSE 100 index of leading shares was up 0.3 percent to 5,219.42; Germany’s DAX rose 0.5 percent to 6,157.44. France’s CAC-40 was up 0.7 percent to 3,650.27.

Positive corporate news pushed up shares in both Europe and the United States.

“The market appears to have once again tried to focus on the positives despite horrendous German and Euro zone ZEW economic sentiment numbers,” said Michael Hewson of CMC Markets.

Shares in British Sky Broadcasting jumped nearly 21 percent in London after it rejected a buyout offer from Rupert Murdoch’s News Corp., that values the company at 12 billion pounds ($17.7 billion). BSkyB said it would consider a sweeter offer, which some analysts expect to be forthcoming, as renewed corporate deal-making helped offset the weak economic data.

U.S. stocks also rose after industrial equipment maker Illinois Tool Works Inc. said it was seeing stronger demand.

In midmorning trading, the Dow Jones industrial average rose 72.71, or 0.7 percent, to 10,263.60.

Oil prices hovered above $75 a barrel as traders eyed demand for crude, while key indexes in Asia posted either minuscule gains or losses after an indecisive day of trading.

Key indexes in Japan and Hong Kong rose tepidly. The dollar weakened against the yen and the euro slipped against the greenback. The Nikkei 225 stock average closed up 0.1 percent at 9,887.89. Hong Kong’s Hang Seng added 0.1 percent to 20,062.15.

Elsewhere, benchmarks in Australia, Thailand and South Korea were down. Financial markets in mainland China were closed for a holiday.

“Overseas markets have regained some of their nerve,” said Howard Gorges, vice chairman of South China Brokerage in Hong Kong. “People will still be wary because of what goes on in Greece or Spain, but there’s been so much adverse news that markets are ignoring quite a lot of it.”

While the euro has risen since hitting a four-year low earlier in June, it has dropped more than 15 percent this year and a strong rebound isn’t expected in the near-term. Analysts also said traders remained a bit on edge, and markets could stay choppy.

“It is a seesaw situation,” said Castor Pang, director of research at Cinda International in Hong Kong. “Most investors are still cautious.”

In currencies, the dollar slipped to 91.37 yen from 91.58 yen late Monday in New York. The euro rose to $1.2284 from $1.2210.

Benchmark crude for July delivery was up 84 cents to $75.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.34 to settle at $75.12 on Monday.


AP writer Pamela Sampson contributed from Bangkok.

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