European stocks steady ahead of key US earnings
LONDON — European stock markets were little changed Thursday as investors awaited a raft of third-quarter U.S earnings, a day after forecast-busting profits from JP Morgan Chase & Co. pushed many of the world’s major indexes up to year highs.
The FTSE 100 index of leading British shares was down 3.85 points, or 0.1 percent, at 5,252.25. Meanwhile Germany’s DAX rose 3.02 points, or 0.1 percent, to 5,857.16 and France’s CAC-40 was up 5.64 points, or 0.2 percent, at 3,888.31.
All three indexes closed Wednesday at their highest levels for over a year after JP Morgan kicked off the U.S. third-quarter banking reporting season with a much higher than expected $3.6 billion net profit. Intel Corp., the world’s largest chipmaker, also beat analysts’ estimates and said it expects sales in the final period of the year to top analyst projections, raising hopes that the computer market was improving.
The results from JP Morgan and Intel helped breathe new life into talk of a stronger than anticipated global economic recovery, which has contributed to the big rally in stock markets over the last few months.
In the U.S., investors cheered the news, sending the Dow Jones industrial average above the key 10,000 level for the first time since October last year. Wall Street is expected to open largely flat later, with Dow futures up 8 points, or 0.1 percent, at 9,960 while the broader Standard & Poor’s 500 futures rose 0.5 point, or 0.1 percent, to 1,088.20.
Howard Wheeldon, senior strategist at BGC Partners, said investors across all markets, whether stocks or commodities or bonds, have to be careful that they don’t over-react to the better than expected earnings. He noted that results from Finnish mobile phone maker Nokia Corp. were hardly stellar.
Nokia reported a loss of €559 million ($832 million) in the third quarter, taking hits from a 20 percent drop in sales and a one-time charge for the fallen value of its network equipment unit. Its shares slid nearly 7 percent.
“We must take care now not to ignore the likelihood that what we are seeing unfold before our eyes now is nothing short of a bubble and one that at some point will surely burst,” he said.
Wheeldon said there’s every chance that the “current bout of euphoria could well turn into hysteria” if Goldman Sachs Group Inc. turns in an even more impressive set of results than JP Morgan when it unveils third-quarter earnings later.
Citigroup Inc. is also set to report later. It’s Bank of America Corp’s turn Friday.
Other companies due to report Thursday include Google Inc. and IBM Corp.
“After a lukewarm start to earnings season it seems that numbers are starting to improve helping to push global indices higher,” said James Hughes, market analyst at CMC Markets.
“However this will have to continue if the market is to hold on to this key level,” said Hughes.
Earlier in Asia, stocks had rallied hard, as investors caught up with the gains posted in Europe and the U.S. Wednesday.
In Japan, the Nikkei 225 stock average gained 178.44 points, or 1.8 percent, to 10,238.65, and Hong Kong’s benchmark added 112.60, or 0.5 percent, to 21,999.08, hitting a new high for the year during trade.
South Korea’s Kospi edged up 0.6 percent, while markets in mainland China and Taiwan also were higher.
Australia’s stock market and currency made further gains amid rising confidence about its resource-driven economy, with the benchmark stock index up 0.6 percent. On Thursday, the country’s central bank chief said the worst of the global financial crisis is probably over for Australia and suggested more rises in interest rates to contain the threat of inflation.
Thailand bucked Asia’s advance as worries about the health of the country’s 81-year-old king sent the stock market plunging over 8 percent at one point.
Meanwhile, the dollar pared early losses after hitting another 14-month low against the euro.
The dollar was up 0.9 percent at 90.15 yen while the euro fell 0.2 percent at $1.4897, having earlier hit $1.4967, its highest level since August 2008.
Oil prices rose towards year highs on growing investor optimism about an economic recovery. Benchmark crude for November delivery was up 15 cents to $75.33 a barrel.
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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
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