Strong US earnings, data boost European stocks

European stocks hit an 18-month closing high yesterday, as forecast-beating results from JPMorgan and Intel and solid US retail sales brightened the prospect for economic recovery.

The FTSEurofirst 300 index of top European shares closed 0.6 per cent higher at 1,105.32 points, reversing a two-session losing run.

Around Europe, UK's FTSE 100 index gained 0.6 per cent, Germany's DAX index rose 0.8 per cent, and France's CAC 40 added 0.6 per cent. Tech stocks made strong gains after Intel, the world's top chip maker, posted better than expected quarterly results. STMicroelectronics rose 2.7 per cent and Infineon gained 2.8 per cent.

"The mood in European stock markets has turned better and better during the course of the day," said Kim Saugsted, senior investment adviser at pan-Nordic bank Nordea in Copenhagen. "The reason behind the good mood is that the U.S. corporate earnings reporting season has gotten off to a good start."

Banking stocks also led the broad rally, with UBS rising 2.4 per cent, Deutsche Bank up 3.1 per cent and BNP Paribas up 1.6 per cent.

JPMorgan posted a quarterly profit that topped analysts' forecasts as revenue from its investment bank eclipsed losses on consumer loans.

"The largest positive surprise in the report is that the consumer credit trends ... showed improvement in delinquencies - this will spur the sentiment running in the market that the US economy is on its way to recovery," said Christian Tegllund Blaabjerg, head of equity strategy at Saxo Bank in Copenhagen.

Positive news also came from the macro side, with sales at US retailers in March rising 1.6 per cent, versus a forecast of a 1.2 per cent increase. Separately, consumer prices were up 0.1 per cent, matching expectations, giving the US Federal Reserve some leeway to keep ultra-low interest rates.

Fed Chairman Ben Bernanke said yesterday the US economy is still being weighed down by weakness in the construction sector and battered state and city budgets.

In the prepared text of his congressional testimony, Mr Bernanke did not directly refer to the near-term outlook for benchmark interest rates or the US central bank's vow to keep them low for an "extended period."

"The chairman acknowledged the exceptionally strong pace of GDP growth in Q4 but said much of this gain reflected a realignment of inventories as well as fiscal stimulus," Nomura economists wrote in a note.

In Europe interest rate hikes might not come before 2011, according to a Reuters poll published yesterday.

Results of the survey show the eurozone economy will grow more slowly than previously thought this year, forcing the European Central Bank to hold interest rates down, but the chances of the 16-nation bloc breaking up are seen as slim.

Shares in Danish shipping and oil group A.P. Moller-Maersk rose 5.9 per cent, lifted by positive economic data from Singapore, which sent an Asian rival's stock to 20-month highs.

"Developments in Singapore and all of Asia are important for A.P. Moller-Maersk and other container shipping lines," said Ole Jensen, head of equities at Sydbank.

Greece's debt worries were back in investors' minds yesterday, after a Moody's analyst said the country is still more likely than not to suffer a ratings downgrade over the next 18 months despite the cushion of an EU safety net, though the analyst said the risk of default is low.