Market tone remains positive on solid US earnings

Solid US corporate earnings, ECB rate cut hopes shore up markets

Associated Press
Asia stocks mixed after US durable goods falls
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A man walks in front of the electronic stock board of a securities firm showing Japan's Nikkei 225 index that rose 230.85 points to 13,760.50 in Tokyo, Wednesday, April 24, 2013. An increase in new U.S. home sales and strong corporate earnings across a range of industries lifted investment sentiment in Asia, where most stock markets rose Wednesday. (AP Photo/Itsuo Inouye)

LONDON (AP) -- The positive tone in markets continued Wednesday, a day after investors were cheered by a run of strong U.S. corporate earnings and rising hopes of an interest rate cut from the European Central Bank.

Another weak business survey for Germany, Europe's biggest economy, reinforced the expectations that the ECB will reduce borrowing costs again at its policy meeting next Thursday.

The Ifo Institute said its main index of business optimism fell to 104.4 points from 106.7 in March. Market analysts had expected a more modest decline to 106.2.

"IFO data from Germany today repeats this observation, but rate cut forecasts now look to be baked in to current prices," said Chris Beauchamp, market analyst at IG.

Because expectations of rate cuts are largely priced in now, the response in markets has been muted compared with the sharp gains made Tuesday.

Germany's DAX rose 0.4 percent to 7,687 while the CAC-40 in France was 0.6 percent higher at 3,806. Meanwhile, the FTSE 100 index of leading British shares was up 0.3 percent at 6,421 — Britain doesn't use the euro so it isn't directly affected by developments with regard to the ECB, which controls monetary policy for the 17 European Union countries that use the euro.

European markets have also been buoyed in recent days by progress in Italy to produce a government after inconclusive elections in February. The president was reelected over the weekend and on Wednesday he was expected to ask a center-left politician, Enrico Letta, to form a new executive government.

Wall Street was poised for a solid opening after its advance Tuesday — Dow futures and the broader S&P 500 futures were both up 0.2 percent.

Once again the focus in the U.S. will likely remain on earnings after a stream of positive news on Tuesday from the likes of Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet. In an after-hours statement, Apple said it will distribute $100 billion in cash to its shareholders by the end of 2015, a move that helped ease concerns over a fall in profits and a fairly cautious outlook statement.

"Generally speaking, the earnings season thus far has been characterised by better than expected earnings but for revenue to be coming in slightly below expectations," said Gary Jenkins, managing director of Swordfish Research. "Apple reported last night and whilst the results were slightly better than the recently marked down expectations, they did warn that revenues for this quarter would be below estimates."

Later, consumer goods giant Procter & Gamble, drug maker Eli Lilly and Boeing will release earnings.

Earlier in Asia, stocks rallied in the wake of the big gains recorded in Europe and the U.S. the previous day. Japan's Nikkei 225 index jumped 2.3 percent to close at 13,843.46, its highest close since June 2008, while South Korea's Kospi rose 0.9 percent to 1,935.31.

Hong Kong and mainland Chinese stocks also climbed on expectations that the central government might take action to boost the Chinese economy after recent data showed growth lagging in the world's No. 2 economy.

Hong Kong's Hang Seng advanced 1.7 percent to 22,183.05. Mainland Chinese shares bounced back a day after sharp drops. The Shanghai Composite Index rose 1.6 percent to 2,218.32 and the Shenzhen Composite Index gained 2.2 percent to 943.78.

The currency markets were relatively subdued, with the euro 0.1 percent higher at $1.3011 and the dollar steady at 99.50 yen.

Oil prices advance as traders waded back into the oil market following a string of positive corporate earnings and solid U.S. home sales figures — the benchmark New York rate was up 72 cents at $89.90 a barrel.

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