Oil and earnings play on investors minds

[PeterGibbons]

Oil and earnings play on investors minds
FT.com, Thursday January 19, 1:05 pm ET
By Dave Shellock

A rebound for Japanese stocks on Thursday had only a limited impact on equity markets elsewhere as investors continued to worry about high oil prices and corporate earnings.
The Nikkei 225 Average in Tokyo jumped 2.3 per cent, its biggest one-day rise for three months. The gain followed a near-6 per cent slide over the previous two sessions, which was sparked by news of an investigation into Livedoor, the internet services group.

Analysts remained broadly optimistic about the prospects for Tokyo stocks despite their rollercoaster ride this week.

"The Japanese market has come a long way in recent months, so events like the recent sell-off are always bound to occur," said Jeremy Podger, manager of Threadneedle Investments' Global Select Fund.

"The important thing to remember, though, is that the economic and corporate recovery remains on track."

The Nikkei's advance set a positive tone for European stocks, and the FTSE Eurofirst 300 index rose 0.5 per cent. Mining stocks got a boost from rising metals prices.

But an initial rally on Wall Street soon evaporated despite positive earnings reports from Pfizer, the drugs group, and Merrill Lynch, the investment bank.

By midday, the Dow Jones Industrial Average was up just 0.1 per cent and the S&P 500 moved 0.2 per cent higher.

But the technology-heavy Nasdaq Composite advanced 0.8 per cent, helped by a rally for Advanced Micro Devices after the chipmaker unveiled strong results.

High oil prices continued to unsettle equity investors. The benchmark Nymex crude future was hovering around the $66 a barrel mark as lingering concerns about supply disruptions outweighed news of an unexpected rise in US crude inventories last week.

"The worsening unrest in Nigeria, which has involved disruption to supply and more important still, the current crisis involving Iran, have the potential to propel the oil price back up to last August's high and beyond," said John Lewis at independent consultancy Sevendaysahead.com.

"Now the US and its European allies have lost patience with Iran and are threatening to refer that country to the United Nations Security Council, Iran has threatened to retaliate using its status as the world's fourth largest oil exporter as a weapon.

"Since this crisis will not dissolve into the background we expect an increase of volatility to result, as the market eventually makes significant new highs. We advise traders to stay long and buy into any sell-off," he added.

Metals prices resumed their upward momentum amid continued fund buying.

Copper and zinc both hit all-time highs, while aluminium touched a 17-year peak. Gold climbed above $554 an ounce in European trading but remained short of the 25-year high of $564 hit earlier in the week.

The dollar held firm and Treasury bonds fell as a surprisingly large fall in new US jobless claims encouraged the view that the Federal Reserve would raise interest rates at least once more.

"This is a big surprise," said Ian Shepherdson, chief US economist at High Frequency Economics.

"Two big declines in three weeks does not mean for sure the trend in claims has fallen but it certainly means we'll be watching the next few weeks' numbers very closely. If claims remain anywhere near this week's level, they will send a very strong signal that the labour market is tightening," he said.
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Peter Gibbons
SunnyGardens.com

[iFinancialAdviser]

[PeterGibbons]

I agree, scandals like Livedoor eventually breakaway into their own personal hell, while the overall market subsides from the effect of the short term shock.
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Peter Gibbons
SunnyGardens.com

[iFinancialAdviser]

[PeterGibbons]