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Thursday, April 15, 2010

World stocks hit 2010 high on earnings, China

Strong growth in China and upbeat corporate earnings lifted world stocks on Thursday to a new high for the year, putting them at levels last seen around the collapse of Lehman Brothers. World stocks as measured by MSCI were up 0.1 percent, extending recent gains to Sept. 2008 levels.

The index all-country world index is now up around 6 percent this year. China's economic growth quickened in the first quarter to 11.9 percent year-on-year, the fastest pace since 2007, benefiting from a low base of comparison last year and the momentum imparted by massive government stimulus. At the same time, investors are being buoyed by robust earnings announcements on Wall Street.

JPMorgan reported quarterly profit that beat forecasts, as investment banking earnings gained and loan losses slowed. Tech bellwether Intel Corp also posted better-than-expected results. "There was a bit of a stumble at the start of U.S. results with Alcoa, but after that we've had a lot of good news with Intel and JPMorgan," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

The pan-European FTSEurofirst 300 was up 0.3 percent for a year to date gain of nearly 6 percent. Japan's Nikkei earlier closed up 0.6 percent. Japan has generally been outperforming this year. The Nikkei is up close to 7 percent and the broader TOPIX has gained more than 10 percent since the end of 2009.

GREEK FEAR

The dollar initially fell after the Chinese data, but later recovered, while the euro came under selling pressure after a widening in the spread between Greek and German bonds highlighted ongoing concerns about Greece's debt problems.

Analysts said ongoing improvement in the Chinese economy would bolster the argument for a strong yuan currency, and that a freer exchange rate may be soon in the offing. Such a move is seen boosting Asian currencies to the detriment of the dollar.

"The data was another piece of the revaluation puzzle," said Sven Schubert, currency analyst at Credit Suisse in Zurich. The dollar was up 0.2 percent against a currency basket after spending much of the day in negative territory. On Wednesday, it sank to a four-week low. The euro slipped 0.4 percent to the day's low of $1.3586, pulling back from the day's high of $1.3666.

Euro zone government bonds yields were flat to slightly lower, with core government bonds remaining broadly supported as sovereign credit concerns remain at the forefront of investors' minds. Persistent worries about Greece's debt pushed 10-year yield spreads over Bunds back above 400 basis points on Wednesday, and Portugal was also under pressure, with the cost of insuring the country's debt against default hitting its highest since February after the European Commission said the country may need additional fiscal cuts this year

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