Stocks rise on earnings; oil rallies

By Walter Brandimarte

NEW YORK (BestGrowthStock) – World stocks and oil prices rose on Tuesday as strong corporate earnings fueled optimism about the global economy, reducing safe-haven demand for the U.S. dollar and the Japanese yen.

The Canadian dollar soared after the Bank of Canada signaled it may raise interest rates as early as June, becoming the first among the Group of 7 rich nations to indicate it will raise rates as it cited recent improvements in the economic outlook.

But persistent concerns about Greece’s financial situation knocked down the euro, also providing some support for Treasury prices, which mostly fell after a recent rally.

News from Wall Street powerhouse Goldman Sachs Group Inc (GS.N: ) that its earnings doubled in the first quarter helped drive investor confidence that the economy is recovering. The news deflected attention from fraud accusations against the bank by U.S. regulators.

Goldman results came a day after Citigroup Inc (C.N: ) announced its best quarterly results in nearly three years.

“The focus from the Goldman Sachs investigation has shifted back to earnings, the true driver of markets,” said Andre Bakhos, director of market analytics at Lek Securities in New York. “Optimism about this earnings season seems to be coming back into play.”

Renewed optimism about the economy translated into higher oil prices, which boosted energy shares on both sides of the Atlantic and supported Wall Street’s main stock indexes.

The Dow Jones industrial average (.DJI: ) ended up 25.01 points, or 0.23 percent, at 11,117.06 while the Standard & Poor’s 500 Index (.SPX: ) climbed 9.65 points, or 0.81 percent, to 1,207.17. The Nasdaq Composite Index (.IXIC: ) rose 20.20 points, or 0.81 percent, to 2,500.31.

Goldman Sachs’ shares fell 2.1 percent despite its strong results, as Britain’s market watchdog launched its own probe on the bank, but financial stocks overall were stronger, with the KBW bank index (.BKX: ) jumping 2.7 percent.

Energy stocks rose as crude oil futures topped $83 a barrel, with the S&P energy index (.GSPE: ) up 1.9 percent.

Still, gains were modest as investors found some cracks in corporate results. International Business Machines Corp (IBM.N: ) reported better-than-expected profits but its gross margins disappointed investors, and its shares fell 1.9 percent. Coca-Cola Co (KO.N: ) reported mixed results, and its shares slipped 1.5 percent.

In Europe, the FTSEurofirst 300 index (.FTEU3: ) of top shares ended 1.4 percent higher, with automakers boosted by above-forecast results at Daimler (DAIGn.DE: ) and energy companies gaining on the stronger crude prices.

“Results have driven shares higher. After a couple of down days Citi came out with stellar results and people started buying again,” said Mic Mills, senior trader at ETX Capital.

The MSCI world equity index (.MIWD00000PUS: ) gained 0.9 percent while the MSCI index of emerging market stocks (.MSCIEF: ) jumped 1.1 percent as commodity prices rose.

U.S. crude oil leaped $2, or 2.46 percent, to settle at $83.45 per barrel, and spot gold prices rose 0.31 percent, to $1,138.10 an ounce. The Reuters/Jefferies CRB Index (.CRB: ) of commodity futures gained 0.9 percent.

Oil investors have been studying broader financial markets, like company shares, since last year for signs of economic recovery that would point the way to higher fuel consumption.

GREECE CONCERNS WEIGH ON EURO

Greater risk appetite hurt the U.S. dollar, which was trading nearly stable against a basket of major currencies, according to the U.S. Dollar Index (.DXY: ).

Against the Japanese yen, the dollar was up 0.79 percent at 93.16, a day after the Japanese currency reached a one-month high against the greenback.

The Canadian dollar soared, with the greenback last trading 1.6 percent lower at C$0.9987, after the Bank of Canada abandoned its conditional commitment to keep rates steady until the end of June.

The euro weakened 0.3 percent to $1.3443, hurt by concerns over debt troubles in Greece and other peripheral euro zone economies like Portugal.

European Central Bank Governing Council member Axel Weber denied reports that he had said Greece may require assistance of up to 80 billion euros to avoid default, [ID:nLDE63J0FY]

Weber said he had simply referred to a provisional figure for a three-year period by the Greek Finance Ministry that had since been revised, and his comments had been misinterpreted.

Still, yields on Greece’s 10-year government bond jumped above 8 percent for the first time since Greece adopted the euro in 2001, driving the yield spread over Bunds to a euro lifetime high of 491 basis points.

Those concerns also provided some safe-haven demand for U.S. Treasuries, although prices of shorter-dated notes fell on the earnings optimism.

The benchmark 10-year U.S. Treasury note rose 1/32 in price, with the yield at 3.7974 percent. The 2-year note was down 2/32, with the yield at 1.0121 percent.

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(Additional reporting by Rodrigo Campos; Editing by Leslie Adler)

Stocks rise on earnings; oil rallies