U.K. stocks advanced to a 4 1/2-year high, posting a fourth straight weekly gain, as a report showed German business confidence increased, outweighing a bigger-than- forecast contraction by Britain’s economy.
EasyJet Plc (EZJ), Europe’s second-largest discount carrier, advanced 5.2 percent. International Consolidated Airlines Group SA (IAG) rose 2.1 percent after JPMorgan Chase & Co. raised its recommendation on the shares. Evraz Plc slid 2.3 percent after Bank of America Corp.’s Merrill Lynch unit lowered its recommendation on the stock. BHP Billiton Ltd. slipped 1.6 percent for the biggest drag on the FTSE 100 Index. (UKX)
The benchmark FTSE 100 gained 19.54 points, or 0.3 percent, to 6,284.45 at the close in London, extending its advance this week to 2.1 percent. The volume of shares changing hands on the equity benchmark was 3.4 percent greater than the average of the last 30 days, according to data compiled by Bloomberg. The broader FTSE All-Share Index also added 0.3 percent today, while Ireland’s ISEQ Index rose 0.6 percent.
“It’s the euro zone, U.S. and Asia that really set the tempo for the stock market,” said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “In Germany the ZEW is good news. The countries in northern Europe fare better than those of southern Europe.”
Gross domestic product shrank by 0.3 percent in the final three months of 2012, according to the Office for National Statistics. The median economist estimate had called for GDP to contract by 0.1 percent. Economists define a recession as two consecutive quarters of declining economic output.
U.S. stocks rose for the week, capping the longest stretch of daily gains since 2004, amid better-than-estimated corporate earnings and economic data as lawmakers voted to temporarily suspend the federal debt limit.
Netflix Inc. (NFLX) surged 71 percent after beating its forecast for subscriber growth and posting an unexpected profit. International Business Machines Corp. rose 5.4 percent after forecasting earnings that topped estimates. 3M Co., the maker of Scotch tape, added 1.9 percent as sales growth in Asia, excluding Japan, rose the most in about two years. Apple Inc. (AAPL) fell 12 percent, losing the title of most valuable company to Exxon Mobil Corp. (XOM) amid the slowest profit growth in a decade.
The Standard & Poor’s 500 Index rose 1.1 percent for the week to 1,502.96. It has added 2.2 percent in eight days, the longest rally since November 2004. (SPX) The Dow Jones Industrial Average gained 246.28 points, or 1.8 percent, to 13,895.98. Both measures are trading at the highest levels since 2007.
“People are jumping on the bandwagon,” said Wayne Lin, a fund manager at Baltimore-based Legg Mason Inc. His firm oversees $648 billion. “The earnings are better. Economic figures are trending the right way. The legislators and the administration have gotten the message that they need to work together and investors are seeing that as a positive sign.”
Stocks rose as earnings at 76 percent of the S&P 500 companies which reported results so far have topped analysts’ estimates. Claims for jobless benefits unexpectedly dropped to a five-year low. The index of American leading indicators rose by the most in three months. The U.S. House voted to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts.
The European Central Bank said banks will next week repay more of its emergency three-year loans than economists forecast in another sign the euro region’s debt crisis is abating.
Some 278 financial institutions will return 137.2 billion euros ($184.4 billion) on Jan. 30, the first opportunity for early repayment of the initial three-year loan, the Frankfurt- based ECB said in a statement today. That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. The ECB’s first loan totalled 489 billion euros and banks can continue to make early repayments in coming weeks.
“The ECB is taking back some of the extra liquidity it injected into the banking system a year ago,” said Christian Schulz, senior economist at Berenberg Bank in London. “This is a stark contrast to other central banks such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan, who are still blowing up their balance sheets. No wonder that the euro exchange rate is going up.”
The euro rose about half a cent after the report to $1.3465, the highest since February last year. It traded at $1.3437 at 1:15 p.m. in Frankfurt.
The ECB flooded financial markets with two tranches of so- called Longer Term Refinancing Operations totaling more than 1 trillion euros a year ago after banks stopped lending to each other because of Europe’s debt crisis. Banks have the option of repaying the loans, which were offered at the average of the ECB’s benchmark rate over their duration, after a year.
Johnson & Johnson, the world’s biggest maker of health-care products, dropped 0.8 percent after providing a full-year forecast that was less than analysts estimated. Boeing Co. slipped 1.5 percent after halting deliveries of its grounded 787 Dreamliner until regulators say its batteries are safe. DuPont Co. (DD) advanced 0.8 percent as fourth-quarter profit beat estimates.
The Standard & Poor’s 500 Index (SPX) fell 0.2 percent to 1,482.67 at 10:22 a.m. in New York. The Dow Jones Industrial Average declined 16.80 points, or 0.1 percent, to 13,632.90. Trading in S&P 500 companies was 7.8 percent above the 30-day average at this time of day. U.S. markets were closed yesterday for a holiday.
“Earnings are going to be pretty blah this quarter, largely because the economy is going to be kind of blah,” said Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania. “It’s more a matter of how is Washington going to deal with the fiscal issues that they’ve got and how that impacts the economic environment.”
The S&P 500 surged to the highest level since December 2007 last week as companies including General Electric Co. and Goldman Sachs Group Inc. reported better-than-estimated earnings. Some 73 percent of the 74 companies in the benchmark index that have released results so far exceeded projections, according to data compiled by Bloomberg. Analysts on average forecast growth of 3.8 percent in fourth-quarter profit, the data show.
General Electric Co. (GE) led the Dow Jones Industrial Average to its highest level since 2007 after fourth-quarter profit topped analysts’ estimates, with across- the-board growth in industrial businesses surpassing gains in finance. Adjusted profit from continuing operations rose 13 percent to $4.67 billion, or 44 cents a share, the company said in a statement, topping an average projection from analysts of 43 cents. GE climbed 3.5 percent to $22.04 in New York, making it the biggest advancer among the 30 Dow Jones companies.
Emerging-market expansion fueled the aviation and health- care divisions, which drove industrial performance and helped build a record $210 billion order backlog. That validated Chief Executive Officer Jeffrey Immelt’s strategy of focusing on manufacturing, valued more highly by investors, while shrinking the finance unit after the global credit crisis.
“You see the slow but steady transition to industrial leadership to drive GE’s growth,” Nick Heymann, an analyst at William Blair & Co. in New York, said in an interview on Bloomberg TV with Tom Keene. “Order growth, while it slowed, didn’t stall and you continue to see better pricing.”
Earnings at GE Aviation, the world’s largest maker of jet engines, climbed 22 percent to $1.04 billion, and industrial profit advanced 12 percent. At GE Capital, the finance unit that specializes in lending to small and medium-size companies, profit increased 9 percent to $1.81 billion in the quarter.
Nine out of 10 groups in the S&P 500 (SPX) rose today as industrial shares had the biggest gain. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, fell 8.2 percent to 12.46, the lowest level since April 2007.
The S&P 500 is 5.1 percent below its all-time high of 1,565.15 set in October 2007. The Dow is less than 4 percent away from hitting its record of 14,164.53. About 72 percent of the 67 S&P 500 companies which have reported quarterly results beat analysts forecasts. Fourth-quarter earnings grew 3.8 percent, according to analysts’ estimates compiled by Bloomberg. At the end of last week, they forecast 2.5 percent growth.
U.S. stocks rose, sending the Dow Jones Industrial Average to a five year-high, as House Republicans plan to vote next week on a temporary increase in the debt-limit and investors watched corporate earnings.
Morgan Stanley (MS) and General Electric Co. (GE) advanced at least 3.4 percent as earnings exceeded estimates. Intel Corp. (INTC) dropped 6.3 percent as the world’s largest chipmaker reported a second straight quarter of declining sales. Capital One (COF) Financial Corp., the lender that gets more than half of its revenue from credit cards, sank 7.5 percent as profit missed projections.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,485.98 at 4 p.m. New York time, reversing an earlier drop of 0.4 percent. The Dow added 53.68 points, or 0.4 percent, to 13,649.70. The stock market will be closed on Jan. 21 for a holiday. About 6.6 billion shares changed hands on U.S. exchanges, 6.9 percent above the three-month average.
“It’s a bonbon market,” said John Manley, who helps oversee about $212 billion as chief equity strategist for Wells Fargo Advantage Funds in New York. He spoke in a telephone interview. “We’ve had little pleasant packets of surprises as these corporations keep coming through. I don’t think the box’s finished. Yet you need to remember that the market is near a five-year high and the economy is recovering at a subpar rate.”
Equities rebounded as Majority Leader Eric Cantor of Virginia said in a statement that members of Congress won’t be paid if the House or Senate doesn’t pass a budget by the end of the proposed three-month debt-limit increase. The Treasury Department has said the U.S. will exceed its $16.4 trillion borrowing authority sometime from mid-February to early March. Earlier losses were driven by data showing consumer confidence in the U.S. unexpectedly dropped in January.
Saudi Arabian shares rose for a second trading day, led by Etihad Etisalat Co. (EEC) after the telecommunications company reported fourth-quarter profit that beat analysts’ estimates.
The company, known as Mobily, gained 1.4 percent to 72 riyals. Alinma Bank increased 2.2 percent to 13.8 riyals and Almarai Co. (ALMARAI), the biggest food producer in the Persian Gulf, climbed 1.9 percent to 66.25 riyals. The Tadawul All Share Index was up 0.2 percent to 7050.38 at the 3:30 p.m. close in Riyadh. The Arab world’s biggest stock exchange has gained 3.7 percent this year.
“The outstanding results of Mobily’s fourth-quarter earnings played a major role in driving the index to reverse the trend from red to green,” said Mohammed Al-Omran, a financial analyst and president of the Gulf Center for Financial Consultancy in Riyadh.
Etihad Etisalat today reported an 11 percent increase in profit because of higher revenue from subscriber roaming charges and data services.
Saudi Arabia’s stock exchange is the only Persian gulf bourse operating Saturdays.
“The message we are getting from the futures market is that oil should be $10 to $15 lower,” Dixon told CNBC.
“I think political tensions in Iran, and probably in Syria, will keep it a little higher. If we were to get $10 off the oil price, it broadly equates to about a 1 percent GDP surprise in the Western world.”
Light crude oil traded at $87.81 on Tuesday, having closed the previous session at $87.20. Prices are down 11.2 percent since the start of the year.
(Read More: Gas Prices Hit New 2012 Low)
Dixon said the falling price of oil was due to an increase in oil finds outside of OPEC(Organization of the Petroleum Exporting Countries), coupled with decreasing demand.
“We see falling U.S. demand and rising supply. We see miles driven in the U.S. falling, as there is a modal shift to the cities.”
He added: “I can envisage a scenario where the biggest 40-year tax on the West, i.e. elevated oils since the mid-70s, could be coming to an end.”
Earlier on Tuesday, Steen Jakobsen, chief economist at Saxo Bank, told CNBC the “revolution” in shale gas in the U.S. could push WTI (West Texas Intermediate) crude down to $50.
(Read More: Is 2013 the Year of $50 Oil and $1,200 Gold?)
In a press release issued by the bank, UBS said it had agreed with the U.S. Department of Justice “to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR (London inter-bank offered rate).”
It will reportedly pay $1.2 billion to U.S. authorities, $260.2 million in fines to the U.K.’s Financial Services Authority and $64.6 million to Swiss authorities.
UBS said it will post a fourth-quarter net loss, primarily as a result of provisions for litigation and regulatory matters.
The U.K.’s Financial Services Authority said in a statement that UBS traders, “routinely made requests to the individuals at UBS responsible for determining its LIBOR and EURIBOR submissions to adjust their submissions to benefit the traders’ trading positions.”
It said that “the misconduct was extensive and widespread” and added that “at least 2,000 requests for inappropriate submissions were documented – an unquantifiable number of oral requests, which by their nature would not be documented, were also made.”
“Manipulation was also discussed in internal open chat forums and group emails, and was widely known,” the FSA added.
The FSA documents highlighted conversations between traders and brokers. In one conversation, recorded in September 2008, a trader explained to a broker that “if you keep 6s [i.e. the six month JPY LIBOR rate] unchanged today … I will ****ing do one humongous deal with you … Like a 50,000 buck deal.”
The FSA added that documented communications showed that particular traders and brokers referred to each other in a congratulatory way, such as “the three muscateers [sic]” and “captain caos [sic]“.