World markets buoyed by Intel, Goldman Sachs earnings

By Pan Pylas, AP
Wednesday, July 15, 2009

World markets buoyed by Intel, Goldman Sachs

LONDON — World stock markets rose Wednesday after a raft of upbeat U.S. earnings — particularly from chip maker Intel Corp. and investment bank Goldman Sachs Group Inc. — fueled demand for riskier assets amid hopes that the U.S. economy could soon be growing again.

In Europe, the FTSE 100 index of leading British shares was up 64.25 points, or 1.5 percent, to 4,301.93 while Germany’s DAX rose 76.62 points, or 1.6 percent, to 4,858.31. The CAC-40 in France rose 44.13 points, or 1.4 percent, to 3,126.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average rose for the second day running, closing 7.44 points, or 0.1 percent, higher at 9,269.25. Previously it had fallen for nine straight sessions. And Hong Kong’s Hang Seng jumped 372.93, or 2.1 percent, to 18,258.66.

“Market sentiment is positive and this is being reflected in the equity markets (which) took comfort from Goldman’s results yesterday and an upbeat forecast from Intel,” said Neil Mackinnon, chief economist at ECU Group.

Goldman Sachs kicked off the U.S. banks second-quarter earnings season, reporting second quarter earnings of $2.72 billion, or $4.93 per share, after preferred stock dividends, up on last year’s $2.05 billion, or $4.58 per share.

Over the rest of the week, investors will be particularly interested to see if other big U.S. banks, such as Citigroup Inc. and Bank of America Corp. are in similarly good shape.

Not all the focus rests on the banks, though their improved financial condition could be a harbinger of higher lending to businesses and consumers — crucial if any recovery is to sustain itself.

Investors are closely monitoring earnings this week from retailers to industrialists and the world of technology.

Intel stoked hopes in an after-hours statement that the technology sector may be rebounding and Dow futures were up 76 points, or 0.9 percent, at 8,380 while the broader Standard & Poor’s 500 futures rose 10.60 points, or 1.2 percent, to 912.

Intel reported a better-than-expected net profit of $1 billion for the second quarter, or 18 cents a share. That figure, though, excluded a massive $1.45 billion antitrust fine from the European Union. Including the fine, Intel lost $398 million, or 7 cents per share.

Despite the fine, investors were heartened to hear the company’s chief executive Paul Otellini describe the second quarter growth as the best since 1988 and that he expected a “seasonally stronger second half.”

Otellini’s comments hark back to the hopes that underpinned the rally in equities from the middle of March to the start of June. Investors were then hopeful that the U.S. economy in particular would recover from recession sooner than anticipated and that stocks were undervalued relative to their earnings potential.

But disappointing economic news over the last few weeks altered the mood prevailing among investors that a significant rebound in the U.S. was possible. Since recent highs in early June, the S&P index and the Dow Jones industrial average have dropped around 7 percent.

With earnings releases few and far between later, investors may well focus more on the macroeconomic releases due, such as U.S. June industrial production data and the Empire State survey into manufacturing conditions in and around New York.

Stuart Bennett, an analyst at Calyon Credit Agricole, said the numbers might well “prompt an increase in nervousness about the pace of recovery” despite recent comments from U.S. Treasury Secretary Tim Geithner that the recession may end in months.

Elsewhere in Asia, South Korea’s Kospi, the region’s best performer, gained 2.6 percent, while Australia’s benchmark index gained 1.5 percent and China’s Shanghai index rose 1.4 percent.

Oil prices rose above $60 a barrel as investors looked to a weekly inventory report for clues on U.S. gasoline demand. Benchmark crude for August delivery was up 97 cents to $60.49 a barrel in electronic trading on the New York Mercantile Exchange.

The dollar was flat at 93.56 yen while the euro rose 0.6 percent to $1.4057.


AP Business Writer Kelly Olsen in Seoul contributed to this report.

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