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April 22, 2011 > US earnings give stocks a boost

US earnings give stocks a boost

By Pan Pylas, AP Business Writer

LONDON (AP), Apr 20 - Strong earnings statements in the U.S. helped global stocks rebound Wednesday after a warning over the U.S. credit rating earlier this week had rattled investors. The euro, meanwhile, hit a fresh 15-month high against the dollar as investors' appetite for risk returned.

A number of high-profile U.S. companies, such as investment bank Goldman Sachs Group Inc., chipmaker Intel Corp. and jet engine maker United Technologies Corp. have delivered earnings that beat analysts' expectations, boosting stocks in the run-up to the Easter weekend, when many of the world's exchanges will be closed for four days.

There will be more earnings statements later, with Apple Inc. likely to grab the most attention.

``The reporting season continues to provide fuel for the fire,'' said Anthony Grech, head of research at IG Index.

In Europe, the FTSE 100 index of leading British shares closed up 2.1 percent at 6,022.26 while Germany's DAX rose 3.0 percent to 7,249.19. The CAC-40 in France ended 2.5 percent higher at 4,004.62.

In the U.S., where another solid housing survey added to the positive tone, stocks extended Tuesday's bounceback - the Dow Jones industrial average was up 1.7 percent at 12,468.60 while the broader Standard & Poor's 500 index rose 1.5 percent to 1,331.77.

On Monday, U.S. stocks posted their biggest one-day drop in over a month following a warning from Standard & Poor's that the U.S.'s credit rating had a one-in-three chance of being downgraded given the state of the public finances and worries that policymakers won't be able to come up with a credible deficit reduction plan.

That had consequences around the world, with indexes in Europe tracking Wall Street's decline. Asian markets retreated when they opened for business Tuesday before the earnings statements and the housing data helped calm the waters.

In the currency markets, the dollar has given up all the gains it made in the immediate aftermath of the S&P warning, when it benefited from its status as a safe haven and expectations that U.S. policymakers would rise to the debt challenge now that it was in the spotlight.

The dollar had also advanced against the euro early in the week by mounting concerns that the Greek government will have no option but to seek a way to lessen its debt burden - a potential restructuring would have ramifications all round the eurozone as investors wonder whether Greece would be followed by others.

However, those fears were no longer weighing on the euro. By late afternoon London time, the currency was trading 1.4 percent higher at $1.4519, its highest level since January 2010.

The euro is a direct beneficiary of improved investor appetite for risk. When investors feel more confident about making supposedly riskier trades, the euro often rises against the dollar.

For most of this year, the euro has gained ground despite ongoing debt problems in a number of countries, including Portugal and Greece. That's because the markets are pricing in further interest rate increases from the European Central Bank following its first in nearly three years earlier this month, in contrast to the U.S. Federal Reserve, which is not expected to raise borrowing costs for a while yet.

``Foreign exchange movements are generally reflecting renewed global demand for risk and yield,'' said Vassili Serebriakov, a currency strategist at Wells Fargo Bank.

Earlier in Asia, Japan's Nikkei 225 climbed 1.8 percent to close at 9,606.82 despite a government report showing that exports for March dropped for the first time in 16 months - one of many consequences felt from the mammoth earthquake and tsunami that devastated the country's industrial northeast last month. The index is down more than 6 percent since the March 11 disaster.

South Korea's Kospi added 2.2 percent to 2,169.91, and Hong Kong's Hang Seng rose 1.6 percent to 23,896.10.

Australia's S&P/ASX 200 gained 1.4 percent to 4,859. Mainland China's Shanghai Composite Index rose 0.3 percent to 3,007.04. Benchmarks in Singapore, Taiwan and New Zealand also rose.

In the oil markets, prices remained elevated as the fighting in Libya continued. Benchmark crude for June delivery was up $2.43 to $110.71 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

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