AJC: European markets trim gains as US set for retreat
LONDON — European stock markets trimmed gains Friday as investors booked profits accumulated this week despite another batch of upbeat earnings from the U.S., most notably from Bank of America Corp. and Citigroup Inc.
In Europe, the FTSE 100 index of leading British shares was up 15.61 points, or 0.4 percent, at 4,377.45 while France's CAC-40 was up 16.07 points, or 0.2 percent, at 3,215.75. Germany's DAX was 16.07 points, or 0.5 percent, higher at 4,967.13 having earlier breached the 5,000 level for the first time in a month.
Europe's markets had been around 1 percent higher earlier in the session but expected profit-taking on Wall Street saw the gains reduced. Dow futures were down 41 points, or 0.5 percent, at 8,628 while the broader Standard&Poor's 500 futures fell 6.5 points, or 0.7 percent, to 929.20.
Analysts said profit-taking was hardly a surprise after the big increases posted this week — the Dow Jones industrial average has risen around 8 percent just this week, its best performance for months.
However, they also noted that further upbeat earnings news may well keep this week's rally going into the weekend.
"A correction looks a fair assumption but with the new improved sentiment, and likelihood that that the results out this afternoon will be good, this correction may well not be today," said Philip Gillet, a sales trader at IG Index.
Overall, investor appetite for stocks continues after a string of better than expected U.S. second-quarter corporate earnings, not least from technology bellwethers IBM Corp. and Google Inc. Their strong after-hours statements reinforced hopes that the worst of the recession is over.
Bank of America and Citigroup joined other big banks in reporting better than expected second-quarter profits.
Though equity markets have enjoyed a strong run this week, investors are reluctant to call the start of another sustained upturn as the rally from the middle of March to the start of June was underpinned by similar signs of a pick-up in activity — but disappointing economic news over the last month quickly altered the prevailing mood.
Neil Mackinnon, chief economist at ECU Group, said he wouldn't be surprised if risk aversion returned to the markets.
"There are plenty of factors from the Jakarta bombings through to fresh worries in financials," he said, citing the possible bankruptcy of U.S. commercial lender CIT Group Inc., the exposure of U.S. regional banks to the commercial real estate market and swine flu deaths.
Earlier, most Asian markets advanced amid ongoing optimism. Indonesia's main stock measure bucked the trend though and fell after a pair of powerful explosions killed eight and wounded at least 50 people at the upscale Ritz-Carlton and Marriott hotels in Jakarta. The country's currency, the rupiah, dropped almost 1 percent against the dollar.
Japan's Nikkei 225 stock average rose 51.16 points, or 0.6 percent, to 9,395.32 and Hong Kong's Hang Seng was up 443.79, or 2.4 percent, at 18,805.66.
Elsewhere in Asia, South Korea's Kospi added 0.6 percent while Australia's market closed up 0.1 percent.
Meanwhile, oil prices fell 31 cents to $61.71 a barrel trade amid signs of sluggish crude demand.
The dollar fell 0.1 percent to 93.65 yen while the euro dropped 0.4 percent to $1.4089.
