European stocks close higher while earnings offset US jobs statistics
European stock markets closed higher yesterday, extending gains as positive US corporate results and hopes of fresh stimulus measures offset another batch of disappointing US jobs figures.
Dealers said news of a sharper-than-expected jump in new US unemployment claims highlighted again the problems of a faltering economy which is failing to produce anywhere near enough jobs. They noted, however, that the data is volatile, allowing investors to focus on the positives in the market, mainly strong corporate earnings.
In London, the benchmark FTSE 100 index of top companies closed up 0.50 per cent at 5,714.19 points. In Frankfurt, the DAX 30 rose 1.11 per cent to 6,758.39 points and in Paris the CAC 40 gained 0.87 per cent to 3,263.64 points.
Madrid ended up 0.63 per cent even though Spain had to offer investors sharply higher interest rates when raising €2.98 billion on the markets. Milan rose 0.53 per cent.
In foreign exchange deals, the European single currency fell to $1.2255 from $1.2280 in New York late on Wednesday, amid rising expectations of a fresh injection of cash by the Federal Reserve into the economy.
In New York, stocks were also firmer, with the blue-chip Dow Jones Industrial Average up 0.13 per cent at around 1600 GMT while the tech-heavy Nasdaq added 0.74 per cent
Solid corporate earnings helped “soothe the sting from a jump in weekly initial jobless claims, which likely continued to be distorted by seasonal adjustment factors,” said Charles Schwab & Co. analysts.
There were 386,000 initial jobless claims in the week ending July 14, up almost 10 per cent and well above expectations of a rise to 365,000.
In London, said Chris Beauchamp, an analyst at IG Index trading group said “decent US earnings are doing their bit”, adding: “Investors remain content to believe the Fed will act if push comes to shove.”
He said the Spanish bond sale “provided some excitement, as (rates) advanced and demand dropped, reminding us that although Europe is currently quiet, it has not gone away.”
Investors reacted well to news that Intel, the world’s leading semiconductor maker, on Wednesday posted better-than-expected earnings for the April-June quarter.
Internet search giant Yahoo! meanwhile posted above forecast results and Bank of America said it had swung back into the black in the second quarter after posting a loss of almost $9 billion a year ago.
Adding to the positive sentiment was the Fed’s Beige Book report, which offered some reassurance amid worries about a recent run of disappointing data, saying “overall economic activity continued to expand at a modest to moderate pace in June and early July.”
Fed chairman Ben Bernanke, testifying for a second day to Congress, reiterated that the economy was slowing and the central bank would act if warranted to boost growth.
He told lawmakers that it was “certainly possible” the central bank could take new steps to support the economy if the jobs market failed to pick up.