While you were sleeping: Upbeat G-7, earnings lift Wall St

Monday 27th April 2009

Finance chiefs from the Group of Seven nations said the global economy may begin a 'weak' recovery this year, stoking optimism the recession may have bottomed.

Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilisation are emerging, G-7 finance ministers and central bankers said in a statement after talks in Washington.

At the same time, stronger-than-expected orders for US durable goods and new home sales fanned optimism the downturn is abating in the world's biggest economy. Durable goods orders fell 0.8% in March, almost half the predicted decline, according to Commerce Department figures. Sales of new homes fell a less-than-expected 0.6% to a 356,000 annual pace, while figures for February were revised up to a 358,000 annual rate from 337,000.

The Federal Reserve said the impact of recession and financial market turbulence have 'substantially reduced' reserves at the 19 largest US banks though most firms have capital well in excess of regulatory requirement.

The Fed is due to release results of its so-called stress tests next week.

The largest banks may be forced to raise more capital and conserve cash to account for off-balance-sheet assets after accounting for assets held off their balance sheets. The Fed's methodology for its stress tests will drag some US$900 billion onto the books of lenders.

Shares on Wall Street gained on Friday on better-than-expected corporate earnings, though stocks were down in the week. The Dow Jones Industrial Average climbed 1.5% to 8076.29. American Express surged 21% to US$25.30 after the biggest US credit-card company posted earnings from continuing operations that would about double expectations.

Microsoft rose 11% to US$20.91 and DuPont gained 4.8% to US$28.78. The Standard & Poor's 500 rose 1.7% to 866.23 and the Nasdaq Composite rose 2.6% to 1694.29. Ford Motor Co. gained 11% to US$5 after posting a smaller-than-expected first-quarter loss of US$1.8 million, excluding one-time costs. The automaker, which is seeking to avoid a government bailout, reduced cash consumption by 49% to US$3.7 billion by cutting customer incentives and manufacturing costs.

In Europe, the Dow Jones Stoxx 600 rose 2.3% to 215.73 as Xstrata and Aviva surged 14%. The FTSE 100 Index rose 3.4% to a two-month high 4155.99 as prices of metals and crude oil rallied. BHP Billiton jumped 3.6%, Royal Dutch Shell Plc climbed 5.5% and BP Plc rose 4.8%.

Kazakhmys Plc, the biggest copper producer in Kazakhstan, jumped 8.2% after JPMorgan Cazenove rated the company 'outperform.' AstraZeneca Plc gained 5.2% after winning European Union support for its Iressa cancer drug. Germany's DAX Index rose 3% to 4674.32, led by a 6.3% gain for E,ON and a 5.4% increase for Siemens.

Deutsche Bank rose 3.8% and Deutsche Telekom gained 4.1%. France's CAC 40 rose 3.1% to 3102.85 on Friday, led by an 8.8% gain for EADS. Copper rose after figures showed a decline in stockpiles on the London Metal Exchange and Shanghai Futures Exchange.

LME-monitored inventories fell 2.5% to 429,550 metric tons on Friday, the 10th straight decline, while in the week, supplies measured by the Shanghai Futures Exchange tumbled 34% to 15,051 tons.

Copper futures for July delivery rose 3% to US$2.05 a pound on the New York Mercantile Exchange. Crude oil rose as stocks gained and the US dollar weakened. Crude for June delivery rose $1.93 to US$51.55 a barrel in New York.

Oil could rally to as high as US$70 a barrel in the third quarter, according to Nabil Effat, chief technical analyst at Shuaa Capital, the biggest bank in the United Arab Emirates. Oil in New York is in a 'bottoming process,' bound in a range between US$38 and US$55, and once its breaks out of that, it could reach US$65 to US$70 a barrel, Effat said in an interview with Bloomberg.

At an energy roundtable in Tokyo, OPEC and 13 Asian countries urged greater oversight of oil. The meeting called for limits on positions in over-the-counter trades and said excessive volatility in oil prices were 'undesirable.'

Gold rose to a three-week high on Friday after China reported a sharp rise in reserves of the precious metal. Spot gold rose 1.1% to US$912.10 an ounce in New York. Since 2003, China has increased its gold reserves by 75% to 1,054 tonnes, making it one of only six nations holding more than 1,000 tonnes.

German business confidence rebounded more than expected this month, from a 26-year low reached in March, helped by falling interest rates and fiscal stimulus. Confidence climbed to 83.7 from 82.2 in March, according to the Ifo institute's business climate index. The report helped buoy the euro, which rose for a fourth day against the US dollar.

The euro gained 1% to $1.3281 against the dollar and weakened 0.1% to 128.79 against the yen. The dollar fell 1.1% to 96.97 yen.

Businesswire.co.nz

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