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Stock market gets boost from earnings, Germany

Stock market futures in US as well as exchanges across Europe buoyed by German business optimism, US earnings. German stock market up 1 percent. 

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Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange April 20, 2012. A positive German business survey buoyed the German stock market.

Lizza May-David/Remote/Reuters

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An optimistic survey on the German economy lifted stocks across Europe on Friday at the end of a week that was overshadowed by worries over Spain's finances.

The Ifo institute business-climate index for Europe's largest economy edged up to 109.9 points in April from 109.8 in March — the sixth straight increase. Growth in Germany could help weaker nations in the 17-country eurozone as demand for their goods increases.

"This is strong empirical evidence that the recovery of the global economy continued in the last few weeks," analysts at UniCredit wrote in a note. "More optimistic German exporters and a global economy losing momentum simply do not jibe!"

The German optimism was backed up by strong retail sales in the U.K., which grew 1.8 percent in March compared with February.

Investors concerned over whether the eurozone will fall back into disarray were also keeping an eye on a meeting of the Group of 20 leading economies in Washington, where finance chiefs were expected to boost the resources of the International Monetary Fund. The IMF wants to have a larger crisis arsenal to help ailing economies should the financial crisis intensify again.

Ahead of the meeting in Washington, stocks rose across Europe. Britain's FTSE 100 inched up 0.3 percent to 5,761.4. Germany's DAX jumped 1 percent to 6,738.6 and the CAC-40 in Paris gained 0.6 percent to 3,191.2.

Wall Street also appeared headed for a higher opening after relatively strong earnings from corporate giants such as Schlumberger Ltd., which saw a strong rise in profits, and General Electric Co., whose earnings dropped less than analysts had expected. Earnings the day before from Morgan Stanley, eBay, Southwest Airlines and Bank of America were better than expected.

Dow Jones industrial futures rose 0.5 percent to 12,965 and S&P 500 futures were also 0.5 percent higher at 1,378.7.

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Earlier in the day, market sentiment had been weighed down by lackluster U.S. economic data, pulling down markets in most of Asia.

Tokyo's Nikkei 225 index dropped 0.3 percent to close at 9,561.36. South Korea's Kospi lost 1.3 percent to 1,974.65, with the government saying that exports are likely to face headwinds in the second quarter due to Europe's debt crisis and China's slowdown.

Benchmarks in Singapore, Taiwan, India and New Zealand also fell. Australia's S&P/ASX 200 closed marginally higher at 4,366.50.

Shares in Hong Kong and mainland China, meanwhile, rose amid expectations that Beijing will soon lower the ratio of deposits that banks are required to hold in reserve — a move that would boost lending. Hong Kong's Hang Seng rose less than 0.1 percent to 21,010.64 and the Shanghai Composite Index gained 1.2 percent to 2,406.86. The smaller Shenzhen Composite Index gained 0.8 percent to 961.77.

Despite the hedged optimism on European markets going into the weekend, concerns over some of the continent's largest economies — Italy and Spain — is far from over.

The yield, or interest rate, on Spanish 10-year bonds was hovering just below 6 percent at 5.92 percent as the country's government was meeting to approve an extra €10 billion in budget cuts and charges. The yield on the Italian equivalents was also up at 5.63 percent.

Italy and Spain, the eurozone's No.3 and 4 economies, are generally seen as too big to bail out — limiting the options of the currency union which has already spent billions rescuing Greece, Ireland and Portugal. Analysts are speculating that the eurozone may provide targeted help for Spain's struggling banks if the situation deteriorates further, but many fear that limited intervention could quickly open up much larger needs as private investors take fright.

On Monday, the European Union's statistics office will release its figures for 2011 government deficits in the 27-country block. Spain's deficit, which came in at 8.5 percent of economic output according to the Spanish government, will be under close scrutiny with investors eager to see the reasons for the unexpectedly high financial shortfall.

In energy trading, benchmark oil for May delivery was up 79 cents at $103.06 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell by 40 cents to end at $102.27 per barrel on the Nymex on Thursday.

The euro rose 0.35 percent to $1.318 from $1.3130. The dollar rose 0.15 percent to 81.72 yen from 81.46 yen.


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