World Markets Cautiously Hopeful On US Earnings

By Salon Staff

Published January 11, 2012 11:00AM (EST)

LONDON (AP) — World markets mostly rose Wednesday on hopes that the U.S. economic recovery will gather pace, helping corporate earnings and easing some of the stress generated by Europe's debt crisis.

Stocks have been largely buoyant since U.S. jobs data last week showed an increase in the rate of hiring, suggesting that American consumer spending — one of the drivers of world economic growth — could recover faster than expected.

In Europe, however, the outlook is dark. Though Germany's economy expanded 3 percent in 2011, new figures Wednesday implied it contracted slightly in the fourth quarter. Earlier figures showed industrial production and retail sales had fallen in recent months, indications that even Europe's largest economy is feeling the pinch of the debt crisis.

Those concerns were mostly offset Wednesday by hopes that an improving U.S. economy would translate into solid fourth-quarter profits, which companies will announce over the next few weeks.

One positive early sign came from aluminum maker Alcoa — considered an economic bellwether because so many companies use its products — which said late Monday that its fourth-quarter revenue far outpaced analysts' projections.

By mid-morning, Germany's DAX gained 0.1 percent to 6,167.64 and France's CAC-40 rose 0.6 percent to 3,230.51. while Britain's FTSE 100 was flat at 5,695.42.

Wall Street appeared set for small gains on the open, with Dow Jones industrial futures up 0.1 percent at 12,406 and the broader S&P 500 futures also up 0.1 percent, to 1,286.90.

European debt markets also improved, with Italy's benchmark 10-year bond yield falling below the 7 percent threshold that many consider dangerous over the longer-term. The performance of Italian bonds is a key indicator for the eurozone debt crisis because the country, the currency bloc's third-largest economy, is too large to bail out.

Italian Premier Mario Monti was meeting with German Chancellor Angela Merkel in Berlin later in the day, and will likely ask for greater support from fellow EU countries.

In an interview with Germany's Die Welt newspaper, Monti said Italy wanted to see more concrete support in exchange for having passed painful austerity measures.

Some economists say the European Central Bank should help Italy more by buying its government bonds on the open market in larger quantities. That would lower Italy's borrowing rates and ease pressure on its finances. But the ECB, along with Germany, resists such a move.

The ECB will hold its monthly policy meeting on Thursday but most economists expect it to keep interest rates steady.

Another key focus in the debt crisis is Greece's talks with private creditors about having them take a 50 percent cut in their Greek bondholdings. That demand is considered crucial to reducing Greece's enormous debt load, and Merkel has indicated that Greece would not get any more rescue loans until that deal is clinched. A deal is expected by next week, according to Greek officials.

Earlier in Asia, financial markets closed mostly higher on expectations that China will tweak its monetary policy to encourage growth, but in a limited way to prevent inflaming its already sizzling property market.

Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong, said he believes a move from monetary authorities could come shortly after Chinese New Year, which begins Jan. 23 and lasts a week.

"I think we're in a little bit of a wait-and-see period. A lot of larger things are waiting in the wings at the moment," he said.

Japan's Nikkei 225 index rose 0.3 percent to close at 8,447.88. Hong Kong's Hang Seng index gained 0.8 percent to 19,151.94. Australia's S&P ASX 200 added 0.9 percent to 4,187.50.

Benchmarks in Singapore, Taiwan, and India also rose. South Korea's Kospi fell 0.4 percent at 1,845.55.

Mainland Chinese shares edged lower as traders booked profits following two days of sharp gains. The benchmark Shanghai Composite Index lost 0.4 percent while the Shenzhen Composite Index was marginally lower at 880.71. Inflation data was expected out of China on Thursday.

Commodity prices, which rose on expectations that China's economy will continue to grow this year, helped boost mining and energy shares.

Benchmark crude for February delivery lost 12 cents to $102.12 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 93 cents to finish at $102.24 per barrel in New York on Tuesday.

In currency trading, the euro fell to $1.2759 from $1.2790 late Tuesday in New York. The dollar rose to 76.97 yen from 76.82 yen.


Pamela Sampson in Bangkok contributed to this report.

Salon Staff

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