Stocks up on good US news: Morning market insights

The New York Stock Exchange rose overnight on a range of good corporate earnings results and a rise in American home sales. The US is about halfway through its earnings season and over 70% of the companies have reported results above expectations. According to Thompson Reuters only about 15% of companies reported results below expectations so far.

The S&P500 Index was up 0.67% to 1399.98 overnight.

The Dow Jones Industrial Average was also up 0.87% or 113.90 points to 13204.60.

The NASDAQ Index rose 0.69% or 20.98 points to 3050.61.

The US National Association of Realtors index of pending sales rose to a 101.4 reading last month from 97.4 in February. Year-on-year, the March figure marks a 12.8% gain.

West Texas Intermediate (WTI) oil price was up 0.41% to $US104.55 a barrel overnight.

Gold was down 0.23% to be trading at $US1656.60 an ounce.

The Australian dollar was slightly up overnight, buying $US1.0371 at 8am AEST.

Europe

European stock markets closed slightly up in London and Frankfurt, but down in Paris. The French CAC Index was down 0.13% to 3229.32 overnight as the French go to the polls on May 6 with the socialist challenger François Hollande leading in the polls. The Swiss Market Index was down 0.46%, as was the Swedish OMX Stockholm 30 Index, down 0.64%.

The London FTSE 100 closed up 0.52% to 5748.72.

The German DAX was also up 0.53% or 35.40 points to 6739.90.

The European Stoxx50 index was flat,  falling only 0.01% to 2322.69.

On May 6, the same day as the French election, Greece will have its first election campaign since the bailouts and the unpopular austerity policies were implemented.  The polls show no party will gain a mandate to enforce the austerity policies needed to stay in the euro which could lead to more instability.

“There are two worries,” Sarah Hewin, senior economist at Standard Chartered in London told Bloomberg. “It may take time for the two main parties to negotiate a coalition after the election. Second, without a clear mandate from the electorate, the new government is likely to face ongoing parliamentary opposition to austerity and reform.”

Spain’s sovereign credit rating was cut to BBB+ from A by Standard & Poor’s overnight as the Iberian economy contracts. Spain’s short-term rating was lowered to A-2 from A-1, while the outlook on the long-term rating is negative. The Spanish IBEX 35 Index was down 1.29%. The Spanish government’s 10-year borrowing costs have climbed about 70 basis points this year as conservative Prime Minister, Mariano Rajoy struggles to convince investors he can control public finances with unemployment above 23%, debt that continues to grow and a shrinking economy. Banks bad loans have reached the highest levels in almost two decades.

“Spain’s budget trajectory will likely deteriorate against a background of economic contraction,” Standard & Poor’s wrote in the statement. “At the same time, we see an increasing likelihood that Spain’s government will need to provide further fiscal support to the banking sector. As a consequence, we believe there are heightened risks that Spain’s net general government debt could rise further.”

Despite the dire situation the Spanish government will still spend 6% more than it makes in revenues this year, and a further 5.7% in 2013 according to forecasts from the International Monetary Fund published on April 17. Debt will reach 84% of GDP next year, up from 40% in 2008, when a real estate bubble collapsed.

“We could also consider a downgrade if political support for the current reform agenda were to wane,” the S&P statement said. “Moreover, we could lower the ratings if we see that Spain’s external position worsens or its competitiveness does not continue to approach that of its trading partners, a key factor for Spain to return to sustainable economic and employment growth.”