Investors Encouraged by Citi Earnings, Housing Data
Better than expected third-quarter earnings from Citigroup Inc. on Monday helped shore up sentiment in stock markets at the start of a busy week on the U.S. earnings front. The improvement in stocks, though, reined in the dollar’s earlier advance.
In Europe, the FTSE 100 index of leading British shares was up 18.08 points, or 0.3 percent, at 5,721.45 while Germany’s DAX rose 27.80 points, or 0.4 percent, at 6,520.10. The CAC-40 in France was 3.79 points, or 0.1 percent, higher at 3,831.16.
In the U.S., the Dow Jones industrial average was up 32.24 points, or 0.3 percent, at 11,095.02 soon after the open while the broader Standard & Poor’s 500 index rose 2.31 points, or 0.2 percent, at 1,178.50.
Earlier, European markets had been trading lower and Wall Street had been predicted to open lower, before Citigroup reported its third straight quarter of profit as losses from failed loans narrowed.
The bank reported net income available to common shareholders of $2.15 billion, or 7 cents per share, slighly higher than market expectations of 6 cents a share.
There’s a lot of scheduled news to occupy investors this week, including a raft of U.S. corporate earnings statements from all types of U.S. businesses, including Apple, Coca-Cola, Harley Davidson, McDonald’s and Xerox.
Aside from the corporate newsflow, investors will continue to monitor the economic data in the context of what the Fed is planning to do to prop up the ailing U.S. economy.
And on that front, there was some encouraging news that the U.S. housing market may be recovering, albeit slowly.
The National Association of Home Builders said its monthly index of builders’ sentiment rose by three points in October to 16 — that was the first increase in five months.
The economic data out of the U.S. will all be viewed in the context of the Fed’s next policy meeting on November 3.
Friday’s speech by Fed chairman Ben Bernanke failed to offer investors much clarity on what the central bank will announce then. Though Bernanke said the case for another monetary stimulus was growing, he was quiet on the pace and size of any new measures and that helped support the dollar before the turnaround in stocks.
The prospect of more dollars floating around the system has piled the pressure on the currency itself over the last few weeks. Some investors are now thinking that the market has priced in too much easing.
“Bernanke’s understandable caution with respect to this has injected a new dynamic to the problem, and a concern that maybe the Fed could step back a little, or be less dynamic in their actions in November,” said Michael Hewson, markets analyst at CMC Markets.
By mid afternoon London time, the euro was 0.2 percent lower on the day at $1.3947, and substantially below last week’s fresh eight and a half month high of $1.4121.
The yen, though, remains in favor and continued to push up towards last week’s fresh 15-year high against the dollar, which was trading 0.2 percent lower at 81.21 yen.
The dollar perked up against the pound, too, amid mounting expectations that the Bank of England will itself soon announce further monetary easing in the wake of this week’s spending cuts announcement from the coalition government. Investors will be keeping a close eye on a speech Tuesday from Bank of England governor Mervyn King and Wednesday’s publication of the minutes to the last rate-setting meeting.
The pound was down 0.5 percent at $1.5898.
Currencies will form the backdrop to this weekend’s meeting of finance ministers from the Group of 20 industrialized and developing countries in Korea.
There are worrying signs that the consensual approach that emerged at the height of the financial crisis around two years ago is breaking up as the U.S. and China quarrel over their respective economic policies.
Earlier in Asia, Japan’s Nikkei 225 stock average ended more or less flat, finishing at 9,498.49.
Chinese shares fell on massive profit-taking Monday, as caution set in after seven straight days of gains.
The benchmark Shanghai Composite Index lost 15.93 points, or 0.5 percent, to 2,955.23. The Shenzhen Composite Index for China’s smaller, second exchange dropped 1.4 percent, to 1,196.23.
Hong Kong’s Hang Seng dropped 1.2 percent to 23,469.38. Banking heavyweight HSBC was down more than 2 percent — weighed down by U.S. financial stocks that have been affected by mortgage problems that could cost big banks billions.
Benchmark oil for November delivery was up 35 cents to $81.60 a barrel in electronic trading on the New York Mercantile Exchange.
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Associated Press Writer Pamela Sampson in Bangkok contributed to this report.
PAN PYLAS, AP Business Writer LONDON