Stocks, U.S. Futures Rise on Earnings; Bonds Gain, Dollar Drops
Oct. 28 (Bloomberg) -- Stocks and U.S. index futures gained as Exxon Mobil Corp. and Dow Chemical Co. posted higher-than- estimated earnings while companies from Canon Inc. to Sanofi- Aventis SA raised profit forecasts. Treasuries rose, snapping six days of declines, and the dollar weakened.
The MSCI World Index climbed 0.7 percent at 8:33 a.m. in New York, and Standard & Poor's 500 Index futures rose 0.6 percent. Benchmark 10-year notes ended the longest stretch of losses in two years and pushed the yield down from almost a one- month high. The yield on the 10-year Irish bond increased nine basis points to 6.98 percent, driving the yield premium investors demand to hold the debt instead of German bunds to as much as 4.52 percentage points, within two basis points of a record. The Dollar Index fell for the first time in three days, while wheat advanced for a fifth day.
Initial jobless claims unexpectedly fell last week, the government said before tomorrow's report on third-quarter economic performance. About 73 percent of the companies in the MSCI World that reported earnings since Oct. 7 have topped analysts' predictions for per-share profit. Treasuries gained as the Federal Reserve asked bond dealers and investors for projections of central bank asset purchases over the next six months to gauge the possible impact of new efforts to spur growth.
"Corporate earnings are in good shape, while a moderate economic recovery is continuing," said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages $28 billion.
Sanofi, Canon
The Stoxx Europe 600 Index gained 0.8 percent, rebounding from yesterday's 0.8 percent drop, while the MSCI Asia Pacific Index rose 0.5 percent. Sanofi-Aventis rose 1.4 percent after reporting third-quarter earnings increased 8.9 percent. Canon gained 3.7 percent after lifting its profit forecast by 2.1 percent.
Dassault Systemes SA surged 7.9 percent after raising its full-year revenue guidance. France Telecom SA rallied 2 percent after profit topped forecast. Australia & New Zealand Banking Group Ltd., Australia's third-largest lender, climbed 2.9 percent after profit surged 69 percent.
European confidence in the economic outlook improved more than forecast in October, led by a jump among manufacturers, according to the European Commission. An index of executive and consumer sentiment in the 16 euro nations rose to 104.1, compared with a median estimate of 103.5 in a Bloomberg survey.
The gain in U.S. futures indicated the S&P 500 may pare yesterday's 0.3 percent decline. About 85 percent of the companies in the benchmark gauge that have reported results since Oct. 7 have beaten estimates for per-share profit, according to data compiled by Bloomberg. Fifty-three companies the S&P 500 are scheduled to report today.
Exxon, Dow
Exxon's third-quarter net income rose to $1.44 a share from 98 cents a year earlier. Per-share profit was 5 cents more than the average of 14 analysts' estimates compiled by Bloomberg.
Dow, the largest U.S. chemical company, had third-quarter profit of 54 cents a share on an adjusted basis, compared with a 41-cent average estimate in a Bloomberg survey. Motorola Inc. reported earnings of profit of 16 cents a share on an adjusted basis. 3M Co., the maker of sanding belts and Scotch tape, had third-quarter adjusted earnings of $1.53 a share, more than the average $1.51 estimate in a Bloomberg survey.
The yield on 10-year Treasuries dropped three basis points to 2.69 percent, and the seven-year Treasury yield slipped four basis points to 1.99 percent, before the government auctions $29 billion of the securities, the last of four sales this week totaling $109 billion. The 10-year Treasury note's string of declines through yesterday was the longest run in two years.
Fed Meeting
Policy makers are scheduled to meet Nov. 2-3 to consider ways to boost the economy. A report tomorrow will probably show gross domestic product rose at a 2 percent annual pace in the third quarter, up from a 1.7 percent rate in the previous three months, according to the median estimate of 67 economists surveyed by Bloomberg.
The yield premium, or spread, between Portuguese 10-year bonds and equivalent-maturity German debt increased 15 basis points to 3.44 percentage points, after reaching 3.55 percentage points. Credit-default swaps insuring Irish debt jumped 22 basis points to 466, the highest level since Sept. 29, according to CMA, a data provider. Contracts on Portugal's bonds increased 9.5 basis points to 357.5, the highest level in almost two weeks, CMA data show.
A group of Anglo Irish Bank Corp.'s creditors will decline to participate in a debt swap proposed by the nationalized lender, said Houlihan Lokey, an investment bank representing the noteholders. The Portuguese government and the main opposition party broke off talks yesterday on budget cuts.
Peripherals
Speculation that Greece may default as the country struggles to rein in its budget gap has heightened concern that the so-called peripheral countries with Europe's biggest deficits will struggle to contain their debt burdens.
"We don't own any peripherals, and there's not a price really at which we would get involved in those markets at this point because their fundamentals are still so uncertain," said Peter Geike-Cobb, a portfolio manager at Thames River Capital U.K. Ltd., which has the equivalent $6.5 billion of assets under management. "Our strategy would be to stay well clear of these markets."
The dollar weakened against all of its most-traded counterparts, depreciating 0.4 percent to $1.3828 per euro and falling 0.5 percent against the yen to 81.35. New Zealand's dollar climbed against all 16 of its most actively traded peers after Reserve Bank Governor Alan Bollard said interest rates will probably need to increase in the future.
Easing Priced In
Another round of quantitative easing is mostly priced into currency markets and the U.S. dollar will weaken through the end of November before recovering, John Taylor, chairman and founder of FX Concepts Inc., said during a Bloomberg Television interview with Erik Schatzker.
The kiwi snapped a two-day drop versus the greenback, rising 0.7 percent to 75.04 U.S. cents, and advanced 0.2 percent to 61.03 yen. South Korea's won climbed 0.4 percent to 1123.70 per dollar after the government raised its 2010 growth forecast and the current-account surplus increased.
Wheat futures rose 0.8 percent in Chicago, bringing the gain to about 6 percent in five days on speculation of crop damage because of dry weather in the U.S. Cotton led gains in the S&P GSCI Index of 24 commodities, jumping 1.8 percent. Raw sugar advanced 1.4 percent and silver futures climbed 1.1 percent.
The MSCI Emerging Markets Index rose 0.4 percent, rebounding from yesterday's 1.6 percent retreat, the biggest drop in six weeks. India's Sensitive Index advanced 0.6 percent, while Russia's Micex stocks index added 0.7 percent. Turkey's ISE National 100 index slipped as much as 1.9 percent, following yesterday's 3.1 percent decline, after Citigroup Inc. downgraded the country's equity market to "neutral" from "overweight."
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Paul Sillitoe in London at psillitoe@bloomberg.net
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