GLOBAL MARKETS-Shares rally on earnings hopes; U.S. dollar gains

Tue Jul 9, 2013 5:21pm EDT

* Shares rise after Alcoa's solid start to U.S. earnings
    * U.S. dollar rises to three-year peak on Fed expectations
    * Oil closes higher in thin trade

    By Herbert Lash
    NEW YORK, July 9 (Reuters) - Global equity markets extended
gains on Tuesday and the dollar hit a three-year high, spurred
by an optimistic tone among investors after a good start to the
U.S. earnings season and last week's strong U.S. June jobs data.
    Investors were inclined to bet companies will surpass the
low bar that has been set for earnings, hoping for
better-than-expected results that could fuel future gains.
    Adding to the optimism, the pace of hiring by U.S. employers
increased in May, the Labor department said in a report that was
a positive sign for the American job market. 
    Equity markets initially responded favorably to aluminum
producer Alcoa, traditionally the first major U.S.
company to report quarterly earnings, after it posted
encouraging results late on Monday.
    Nine of the S&P's 10 industry sector indexes were higher.
Industrial and material shares logged the biggest gains, though
Alcoa closed down 0.01 percent at $7.91 a share after opening
higher. Alcoa said it sees solid growth in global demand this
    The benchmark S&P 500 index ended the session 1 percent
below its all-time closing high of 1,669.16 reached on May 21. 
    "Whether we go through the 1,650 level is key, and if we do
then we probably get a retest of the May highs," said Dave
Chojnacki, market technician at Street One Financial in
Huntington Valley, Pennsylvania.
    The Dow Jones industrial average closed up 75.65
points, or 0.50 percent, at 15,300.34. The Standard & Poor's 500
Index rose 11.86 points, or 0.72 percent, at 1,652.32.
The Nasdaq Composite Index was up 19.43 points, or 0.56 
percent, at 3,504.26. 
    According to Thomson Reuters data through early Tuesday,
analysts' expectations are for earnings of S&P 500 companies to
rise 2.9 percent in the second quarter from a year ago, while
revenue is forecast to increase 1.5 percent in the period. 
    Of the 23 companies in the S&P 500 that have reported
results, 65.2 percent have beaten analyst expectations, 21.7
percent reported earnings in line with expectations and 13.0
percent reported results that were below expectations. 
    "I would think that the trend is going to be up," said Jeff
Meyerson, head of trading for Sunrise Securities in New York.
"We could at any time have a substantial correction again, but I
think we still have a trend that's doing OK. That will be
determined by how the earnings come out in the next few weeks."
    Miners powered European shares to their highest close in a
month, boosted by adjusted profit and revenue at Alcoa that were
above expectations and helped to buoy sentiment in the sector.
    Comment from Deutsche Bank also helped basic resource
stocks, which are still down 27.7 percent on the year on
earnings worries.
    "There are seeds of recovery out there now that were not
there a year ago," said Robert Quinn, chief European equity
strategist at Standard & Poor's Capital IQ. "I think we are
pretty close to a turning point in earnings downgrades for
European companies." 
    The FTSEurofirst 300 index of leading European
companies hit its highest in a month before paring some gains as
a deal to provide Greece the latest 6.8 billion euro ($8.7
billion) installment of its bailout bolstered the upbeat mood.
 The broad regional index rose 0.79 percent to
close at 1,188.95. 
    MSCI's all-country world equity index rose
0.75 percent. 
    Greece's aid deal helped Greek and Portuguese bonds
 add to their gains of the last few days. It also
helped lift the euro off the seven-week low it has been
at since the European Central Bank made clear last week it is
prepared to cut interest rates again.
    The euro had dropped to a session low against the dollar
after ratings agency Standard & Poor's lowered Italy's sovereign
credit rating. The euro fell as low as $1.2754,
a three-month low, and was last down 0.68 percent at $1.2781. 
    The dollar rose toward recent three-year highs against a
basket of currencies, with more investors betting on further
gains as the Federal Reserve prepares to reduce its stimulus
    The dollar's biggest gains were against the British pound
after weaker-than-expected UK data drove sterling close to a
three-year low and highlighted the divergence between UK and
U.S. monetary policy. 
    The dollar index, which measures the greenback
against a currency basket, was up 0.53 percent at 84.636.
    The euro found some support after Greece secured aid that
will prevent it from defaulting in August, but comments by
European Central Bank policymaker Joerg Asmussen weighed.
    U.S. Treasuries prices held steady as investors prepared to
make room for a $32 billion three-year note sale, the first part
of this week's $66 billion in coupon-bearing supply.
    The 10-year U.S. Treasury note was unchanged in
price to yield 2.677 percent. 
    Trading in Brent and U.S. crude futures contracts was
lackluster for most of the session on thin volume, with late-day
gains fueled by a stock market advance. Trade was lower early in
the session as worries about supply disruptions in the Middle
East kept investors wary.
    Brent settled up 38 cents at $107.81 a barrel. U.S.
crude rose 39 cents to settle at $103.53 a barrel.
    After the oil price settlement, U.S crude jumped more than 1
percent on the release of American Petroleum Institute data
showing crude inventories fell by 9 million barrels, against
expectations for a 3.3 million barrel draw. 
    U.S. light crude futures rose to a high of $104.76.
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