Richard Drew, Associated Press
LONDON — A raft of forecast-busting corporate earnings, another multi-billion dollar deal and few indications that the U.S. Federal Reserve is preparing to alter its super-loose monetary policy supported stocks Thursday despite ongoing turmoil in the Middle East.
Even though many of the world's major indexes are trading at their highest levels since the summer of 2008, investors have not chosen to cash in on recent gains, partly because of a slew of upbeat earnings this week around the world, including those from Swiss food company Nestle on Thursday.
They have also been cheered by the previous day's news that French drug maker Sanofi-Aventis , the world's fourth-largest drug maker, will buy U.S. biotechnology firm Genzyme for $20 billion in cash. A pick up in big deals is one sign of optimism in the markets.
Further support has been provided by Wednesday's publication of the minutes to the last rate-setting meeting of the Fed. Though, rate-setters were a little more optimistic about the state of the U.S. economic recovery and some voiced the possibility that the current $600 billion monetary injection may have to end sooner than expected, there were few signs that policy will be altered soon.
"Unchanged projections for unemployment and core inflation — the Fed's original dual mandate — imply no change in the Fed<s assessment that both aspects of the mandate will be missed, thus no change in stance, for the moment, on monetary policy," said Jeremy Batstone-Carr, head of private client research at Charles Stanley stockbrokers.
"Clearly, the market will be relieved that the Fed chose not to bite the monetary policy bullet at this meeting," he added.
In Europe, the FTSE 100 index of leading British shares was down 0.1 percent at 6,080 while France's CAC-40 fell a similar amount to 4,148. Germany's DAX index was more or less unchanged at 7,413.
Wall Street was also poised for a flat opening too, a day after the Dow Jones industrial average closed at its highest level since June 13, 2008 and the broader Standard & Poor's 500 index ended double the level it was at two years ago!
How stocks end the day could well hinge on a raft of U.S. economic data, not least monthly consumer price inflation figures.
"With global prices on the rise, investors may well use any negative news here as a chance to book profits," said David Jones, chief market strategist at IG Index.
The figures are released a day after producer price data stoked worries that the U.S. economy may be joining Europe and China in exhibiting an inflationary spike.
Inflation is certainly becoming the hot topic in Europe, with price rises in the eurozone and Britain ahead of their respective banks' targets.
Andrew Sentance, perhaps the most hawkish member of the Bank of England's nine-strong rate-setting panel, kept the pressure on his peers to raise interest rates soon. In a speech, Sentance warned that the Bank's inflation projections may be underestimating the true level of price rises and that interest rates will have to rise faster than markets currently anticipate.
His comments helped the pound advance from $1.60 to $1.6030.
That was the main movement in currency markets Thursday, with the euro trading unchanged at $1.3575 and the dollar a tad higher at 83.58 yen.
Earlier in Asia, Japan led markets higher as investors breathed a sigh of relief that the yen's recent appreciation has come to an end as the Japanese currency trades at near two-month lows against the dollar. The Nikkei 225 stock average rose 28.35 points, or 0.3 percent, to close at 10,836.64 — ending at a 10-month high for the fourth session in a row.
Hong Kong's Hang Seng rose 0.6 percent to 23,301.84. Mainland Chinese shares also edged higher, with the benchmark Shanghai Composite Index adding 0.1 percent to 2,926.96, while the Shenzhen Composite Index for China's smaller, second market gained 0.3 percent to 1,286.73.
Benchmark crude for March delivery was down 46 cents at $84.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 67 cents to settle at $84.99 on Wednesday.
Pamela Sampson in Bangkok contributed to this report.
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