World stocks up for third day

LONDON -- World equities rose for the third straight day on Friday as investors scooped up beaten-down stocks and the euro held on to the previous session's hefty gains against the dollar.

Crude prices advanced to $75 a barrel, touching a two-week high, and the cost of protection against government debt default in Greece and other peripheral euro zone sovereigns fell in low volumes.

Fears that Greek's financial crisis could infect other euro zone countries had sparked a sell-off in financial markets around the globe.

The euro was flat versus the dollar at $1.237 on Friday. It has fallen 7 percent against the dollar this month and is set to register its sixth consecutive monthly loss.

"The trend is clearly there for more euro weakness and the focus will be on what is happening to the Spanish banking sector and whether there is anything that could ruin this recovery in risk appetite," said Carl Hammer, SEB currency strategist in Stockholm.

"But the market has come to a more mature level (in euro/dollar) and the euro could rebound short-term due to extreme short euro positioning."

The single currency gained more than 1.5 percent against the dollar on Thursday after China reaffirmed its commitment to diversify currency holdings away from the greenback and denied it was reviewing its holdings of euro assets.

Euro gains came despite comments on Friday by a Spanish government spokesman who said talks with unions and business to overhaul Spain's rigid labor laws were going badly, casting doubt over reforms crucial for reassuring markets about the country's long-term solvency.

STOCKS REBOUND

Global equities measured by the MSCI All-Country World Index .MIWD00000PUS advanced 0.7 percent, gaining for the third consecutive day. The index, however, is down 9.1 percent this month, on track for its worst monthly loss since February 2009.

Stocks were also helped by a relatively strong economic picture in the United States and emerging economies, as well as robust corporate earnings.

Europe's FTSEurofirst 300 .FTEU3 index put on 0.4 percent, while Tokyo's Nikkei average .N225 added 1.3 percent in its best one-day performance for two weeks as exporter shares climbed on a halt in the yen's advance.

Some analysts, however, were more pessimistic about the equity market outlook.

"This recovery rally could soon hit resistance on the upside. This week's low point wasn't the capitulation point, so the risk is still on the downside," said Alexandre Le Drogoff, technical analyst at Aurel BGC.

Five-year credit default swaps on Greek government debt fell to 655 basis points (bps), 27 bps tighter than on Thursday, according to CDS monitor Markit.

The CDS of other peripheral sovereign issuers, such as Portugal and Ireland also fell.

Yields on benchmark 10-year Bunds were down 3 bps at 2.686 percent, while those on 10-year U.S. Treasuries were down 3 bps at 3.3237 percent.

© Thomson Reuters 2010

Stocks head for higher open on positive forecast

May 26, 2010

Malcolm Morrison

The Toronto stock market looked set for a higher open Wednesday as positive economic data helped raise commodity prices and distract investors from Europe’s debt crisis.

U.S. futures also pointed to gains at the open with the Dow Jones industrial futures ahead 74 points to 10,099, the Nasdaq futures rose 15.25 points to 1,830.75 and the S&P 500 futures advanced 9.6 points to 1,082.6.

The Canadian dollar was up 0.4 of a cent to 93.86 cents US after U.S. dollar strength pushed the currency down almost a cent on Tuesday.

Investor sentiment picked up after the Organization for Economic Cooperation and Development, a watchdog for 31 of the most developed economies, raised its forecasts for economic growth in its member countries _ which include Canada, the United States, Japan, Germany and the United Kingdom.

It expects growth to come in at 2.7 per cent this year, up from its forecast of 1.9 per cent last November. But it added that Japan and the U.S. are still expected to outpace Europe.

There was also a strong note of caution in Wednesday’s report.

The OECD said that serious risks including Europe’s sovereign debt crisis and a possible boom-bust scenario in emerging markets such as Brazil, India and China still threaten what it calls a “relatively auspicious” economic environment.

The July crude contract on the New York Mercantile Exchange rose $2.04 to US$70.79 following the report.

The June gold contract on the Nymex rose $15 to US$1,213 an ounce while July copper rose six cents to US$3.11 a pound.

Investors were already sniffing around for bargains after global markets fell back sharply over the last month because of fears that the European debt crisis could worsen and potentially derail a global economic rebound.

North American markets came back from sharp triple digit losses early in Tuesday's session to close little changed.

But the TSX and the Dow industrials fell four per cent just last week. The Toronto market is down over six per cent from its 2010 high posted on April 26.

The TSX should also get support from the financial sector after Bank of Montreal (TSX:BMO) handed in quarterly earnings that beat expectations.

The bank reported quarterly earnings doubled from a year ago to $745-million.

That came out to $1.26 per share of net earnings, or $1.28 per share of cash earnings _ 18 cents per share ahead of analyst estimates in both cases.

Provisions for credit losses during the quarter were reduced by $123 million from a year ago to $249 million for the three months ended April 30.

World stock markets rebounded Wednesday following steep losses the previous day when investors feared the repercussions of painful austerity measures on Europe’s economic growth and the knock-on impact on trading partners like the U.S. and Japan.

The forced merger of a troubled savings bank in Spain has raised the fear of wider troubles in the banking sector and a freeze in credit markets like the one that accompanied the financial crisis in 2007 and 2008.

In Asia, Japan’s benchmark Nikkei 225 stock average closed 0.7 per cent higher after tumbling 3.1 per cent to a six-month low Tuesday.

South Korea’s Kospi index gained 1.4 per cent to 1,582.12 while Australia’s S&P/ASX 200 index was up one per cent. Hong Kong’s Hang Seng index rose 1.1 per cent.

London's FTSE 100 index climbed 2.12 per cent, Frankfurt's DAX gained 1.9 per cent while the Paris CAC 40 was ahead 2.9 per cent.

In other corporate news, Fortress Energy Inc. (TSX:FEI) axed its annual meeting, making an official public announcement just hours before it was set to begin Tuesday. The company said that the meeting was being postponed while its board of directors reviews strategic alternatives. It plans to reschedule the meeting before the end of June.