London: World stocks gained for the third day in a row on Wednesday after reassuring corporate results on Wall Street while a Federal Reserve meeting later on Wednesday was eyed for possible new actions on the credit crisis.
The dollar was generally weaker against most currencies, with the euro rising nearly 1%.
European shares opened sharply higher with the FTSEurofirst 300 index up 1.7%, driven higher by banking and energy stocks. Japan’s Nikkei gained 0.56% a day after jumping 4.9%.
The main driver was a series of modestly positive earnings results from Wall Street overnight.
American Express, for example, posted a quarterly profit that surpassed analysts’ forecasts and chip maker Texas Instruments’ quarterly profit fell less than feared.
“Yahoo had in-line sales after the close in the US and a lot of other companies’ results have not been as bad as expected which is probably creating a more positive atmosphere,” said Bernard McAlinden, market strategist at NCB Stockbrokers in London.
Earnings disappointments, however, remain a major concern for investors. Swiss wealth manager Sarasin said on Wednesday that global estimates still need to fall by 10% to 20%.
“Most companies are going to deliver results that will be even worse than the estimates which have already been significantly downgraded,” it said in a note.
But Sarasin also forecast rises in US and European stock market indexes of 25% to 30% by year-end.
The Fed’s meeting was also in focus. On Tuesday, the US central bank took a step toward easing mortgage foreclosures, announcing it would write down troubled mortgages to keep people in their homes.
The Fed concludes a two-day policy meeting later in the day and with the benchmark interest rate already near zero, the market is looking for any new policy measures, such as purchasing long-dated Treasuries.
“If the Fed makes comments on purchasing Treasuries, it would soothe concerns that overseas investors may start picking up fewer US bonds,” said Hideki Hayashi, chief economist at Shinko Securities.
The euro rose 0.9% against the dollar to $1.3294 and by 1.1% versus the yen to ¥118.51. The dollar also gained 0.3% against the yen to ¥89.11.
Britain’s pound continued to recover versus the dollar after its slump to a 23-year low last week, rising 0.9% to a one-week high of $1.4299. The pound was flat against the euro.
On bond markets, two-year Schatz yields edged up 1.4 basis points to 1.690%, while 10-year Bunds yielded 3.274%, up 1 basis point.