World markets advance amid US earnings cheer

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(The Canadian Press)

By Pan Pylas, The Associated Press

LONDON - World stock markets rose strongly Friday after another batch of solid U.S. earnings and further confirmation that the recovery in Germany, Europe's biggest economy, is gathering pace.

In Europe, Germany's DAX was up 61.74 points, or 1.2 per cent, at 5,819.39 after the Ifo Institute said its monthly business climate index edged up for the seventh month running to 91.9 points in October from 91.3 in September.

The Ifo reading solidified market expectations that Germany, which officially emerged from recession in the second quarter of the year, is rebounding strongly.

That's not the case for Britain, where figures showed output unexpectedly fell by 0.4 per cent in the third quarter from the previous three-month period. The further contraction means that Britain's economy has now shrunk for six quarters in a row - the longest and deepest recession since World War II.

Investors in London brushed aside the grim economic news and the FTSE 100 index of leading shares was up 61.74 points, or 1.2 per cent, at 5,269.10.

"With today's number suggesting that interest rates may well be remaining on the floor for some time, investors still seem happy to see shares as the preferred home for their cash, and this is continuing to fuel the rally," said David Jones, chief market strategist at IG Index.

However, the pound took a battering on foreign exchange markets as investors think it's now more likely than not that the Bank of England will pump more money into the economy.

"Following the squeeze higher in the pound that commenced last week, sterling was particularly vulnerable to the bad news," said Jane Foley, research director at Forex.com.

At one stage after the data, the pound dropped 2.5 cents, before recovering somewhat. By early afternoon London time, the pound was 1.2 per cent lower at $1.6419, while the euro jumped 1.2 per cent against it, to 0.9150 pounds.

Meanwhile, France's CAC-40 was 35.30 points, or 0.9 per cent, higher at 3,856.15.

The advance in Europe has been spurred by Thursday's rally on Wall Street, where investors were cheered by upbeat earnings from the likes of Amazon, AT&T and American Express.

So far, a large majority of U.S. companies have reported better-than-expected earnings and painted a fairly rosy picture for the coming months, helping many of the world's major indexes push back above the levels they were over a year ago before Lehman Brothers collapsed.

More U.S. earnings reports are due later Friday, with most attention likely to focus on Microsoft.

Wall Street was expected to open flat. On Thursday, the Dow Jones industrial average rose 1.3 per cent to 10,081.31 - just below Monday's highest close of the year - and the Standard & Poor's 500 closed up 1.1 per cent at 1,092.91.

Earlier in Asia, Japan's Nikkei 225 stock average gained 15.82, or 0.2 per cent, to 10,282.99 and Hong Kong's Hang Seng jumped 379.21, or 1.7 per cent, to 22,589.73.

South Korea's Kospi advanced 0.6 per cent to 1,640.17, while China's Shanghai index climbed 1.9 per cent. Australia's index gained 1 per cent, Taiwanese shares rose 0.5 per cent and Indonesia's benchmark climbed 1.3 per cent.

Oil prices were little changed, with benchmark crude for December delivery down 11 cents to $81.08 a barrel. The contract rose 18 cents to settle at $81.19 on Thursday.

The euro was 0.1 per cent higher at $1.5037 while the dollar rose 0.4 per cent to 91.65 yen.

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AP Business Writer Stephen Wright in Bangkok contributed to this report.