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Equities jump as US earnings please

By Neil Dennis
Published: October 14 2009 13:33 | Last updated: October 14 2009
14:48

Equity markets and commodity prices jumped on Wednesday after
stronger than expected results from JPMorgan boosted appetite for
risk.

JPMorgan was the first of the big US banks to report third-quarter
numbers, which showed underwriting revenues offsetting increasing
losses on underperforming consumer loans.

Together with unexpectedly robust earnings from chipmaker Intel
after the Wall Street close on Tuesday, and forecast-beating retail
sales data for September, the results proved a strong tonic for equity
investors and pushed US stock indices higher at the open.

Both the Dow Jones Industrial Average and the S&P 500 hit their
highest levels of the year, and after about 15 minutes of trade, the
Dow was up 0.9 per cent to 9,958.58, while the S&P added 1.1 per
cent to 1,084.69.

This, in turn, helped European markets advance on gains that were
already fairly robust following data from China showing that the
slowdown in export growth had moderated sharply.

The FTSE Eurofirst 300 climbed 1.8 per cent to 1,013.91, a year high.
London’s FTSE 100 also struck its highest levels in a year, up 1.7 per
cent to 5,243.05.

“Encouraging earnings reports from Intel and now JPMorgan Chase,
and news Chinese exports fell at a slower than expected pace,
helped maintain positive sentiment for risk-on trades,” said Marc
Chandler at Brown Brothers Harriman.
In contrast, the surge in risk sentiment left the dollar lower. It fell 0.3
per cent versus sterling to $1.5979 and was down 0.4 per cent to
$1.4901 against the euro.

“For the dollar and the foreign exchange market more broadly, we will
draw the seemingly simple but important assessment that higher
equity prices help the risk trade proliferate in a manner that weighs on
the dollar and benefits most other G20 currencies,” said Robert Lynch
at HSBC.

Dollar losses helped push commodity prices higher, and gold
continued its record run, notching up another high at $1,071.40 an
ounce. US crude oil reached its peak for the year at $75.17 a barrel.

Government bond markets sold off, sending yields higher. The yield
on the 10-year US Treasury rose 6.7 basis points to 3.41 per cent,
while the 10-year UK gilt yield rose 10.4 basis points to 3.5 per cent.
In the eurozone, the 10-year Bund added 6.4 basis points to 3.23 per
cent.

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