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World stocks rise ahead of US stress tests results
Published in Saudi Press Agency on 07 - 05 - 2009


European markets extended their rally
Thursday ahead of the announcement of the results of the
U.S. government's stress tests on the country's biggest
banks and in anticipation of key interest rate decisions in
Europe, AP reported.
In late morning trading in Europe, Britain's FTSE 100 was
up 2.1 percent to 4,487.95, Germany's DAX rose 1.6 percent
to 4,958.48, and France's CAC 40 added 1.5 percent to
3,331.30.
U.S. markets were also expected to open higher. Dow Jones
futures climbed 0.5 percent to 8,513.00 and Standard &
Poor's 500 futures rose 0.5 percent to 921.50.
Asian stocks likewise pressed higher as early reports
about the U.S. banks' stress tests helped reassure many
investors that a global economic recovery is on the
horizon.
Findings of the government's long-awaited stress tests of
19 banks leaked out Wednesday, a day ahead of the official
announcement. Investors seemed relieved by media reports
indicating the balance sheets of top U.S. banks weren't as
bad as feared, though Bank of America and others were still
facing huge capital shortfalls should the economy worsen.
Some already had enough funds to weather the downturn.
«One can view the stress tests as a success because they
apparently increased confidence in the financial sector,»
said Adrian Mowat, chief Asian equities strategist at JP
Morgan in Hong Kong.
Asian banks soared in line with huge overnight gains by
their American peers, and European financial stocks led the
gains Thursday. A notable exception was Societe Generale,
which fell 5.4 percent after it said it returned to a loss
in the first quarter _ when a further devaluation of its
U.S. real estate-linked assets caused it to take nearly ¤2
billion ($2.7 billion) in new writedowns and provisions.
Better news came from Barclays PLC, which reported
first-quarter net profit rose 12 percent as investment
banking profits surged from the acquisition of U.S. assets
of bankrupt Lehman Brothers. The bank however posted a
steep 79 percent increase in writeoffs on bad investments.
Investors were also awaiting key interest rate decisions
from the European Central Bank and Bank of England.
The ECB is expected to cut its main interest rate by a
quarter point to 1 percent and has said it will unveil
additional measures to help boost the 16-nation euro zone
economy. The Bank of England, meanwhile, is widely expected
to leave its rates at a record low of 0.5 percent but could
provide a progress update on its plan to purchase assets
from banks.
But it was the U.S. government's stress tests that
concerned investors most, as a mood of optimism continued
to pervade the markets.
«All eyes are still going to be on the stress tests later
today, even though we have had a lot of information already
leaked,» said James Hughes, market analyst at CMC Markets
in London.
«It seems that the rally is pretty much relentless at the
moment,» he added. «If you look at the fundamentals at
the moment, why is this market up, it really shouldn't be
at the moment because of so much poor information. There's
optimism with banks which is helping things at the moment,
that the stress tests aren't going to be as bad as first
thought and things may be starting to turn the corner.
«But it may all be short-lived because U.S. markets are
set to post some poor numbers over the next few days,»
Hughes added, referring to new jobless claims later
Thursday and non-farm payroll data Friday.
Japanese shares led the Asian rally, with the Nikkei 225
index surging 408.33 points, or 4.6 percent, to 9,385.70 _
a six-month high _ as investors returning from a three-day
holiday played catch up with gains on other regional
markets.
Hong Kong's Hang Seng was up 383.32, or 2.3 percent, to
17,217.89 and South Korea's Kospi inched 0.6 percent higher
at 1,401.08.
Elsewhere, Australia's benchmark rose about 1.5 percent.
Chinese and Taiwanese markets, both higher in recent days
amid news of greater economic cooperation between the two
rivals, recovered from early losses to add to their gains.
Banks posted some of the day's biggest gains. Mitsubishi
UFJ Financial Group Inc., Japan's biggest bank, shot up
nearly 16 percent, despite warning last week it would post
a $2.6 billion group net loss for last fiscal year.


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