GLOBAL MARKETS: European Stocks Seen Up; Earnings In Focus

LONDON -- European stock markets are expected to open higher Friday, with investors generally bullish ahead of more corporate earnings figures which, so far, have mostly surprised to the upside and painted a brighter picture of the global economy.

The U.S. earnings season continues to generally impress, and, although U.S. Treasury Secretary Timothy Geithner sees risks as still being present, the stimulus packages are appearing to work, and as a result the positive sentiment should continue, albeit at the possible expense of further declines in the greenback, said Ben Potter, research analyst at IG Markets.

And the continued strength in the U.S. looks set to boost European trade early on, said James Hughes, market analyst at CMC Markets, noting that the day is set to be dominated by U.S. corporate earnings from General Electric Co. (GE) and Bank of America Corp. (BAC).

He expected London's FTSE 100 index to open 32 points higher at 5255, Frankfurt's DAX index up 24 points at 5854, and the CAC-40 index in Paris 20 points higher at 3903.

"Yesterday's better numbers from Goldman Sachs Group (GS) will leave investors hungry for more of the same from Bank of America, and, if they can deliver, we could be set for Wall Street to give European indexes more of a kick later this afternoon," added Hughes.

Still, the markets may struggle for direction as both the economic and corporate calendars in the U.K. and Europe are looking fairly quiet, said Hughes. "Traders will want to end the week on a positive note and things look like they will start in this mood. However, all will depend on the earnings news from General Electric and Bank of America, as to whether investor go away for the weekend break with profit in their pockets," he added.

And traders are not interested in holding or taking on more risk heading into weekends at the moment, especially considering how reliant and susceptible the market is to overseas leads, said Potter. "Despite better-than-expected third-quarter reports from Citigroup Inc. (C) and Goldman Sachs, their respective share price falls Thursday would suggest that JPMorgan Chase & Co's (JPM) result may have set the 'expectations bar' too high. It certainly looks like expectations got a bit too far ahead of themselves. When two major companies beat forecasts but still fall, it shows that a lot of momentum was already built into the stock price," added Potter.

On Wall Street, a surge in oil prices helped Chevron and Exxon Mobil push the Industrial Average further above the 10,000 level Thursday, although the reports from Goldman Sachs and Citigroup kept the gains muted.

After closing above 10,000 for the first time in a year on Wednesday, the Industrial Average closed up 47.08 points, or 0.5%, at 10,062.94, marking its fifth gain in six sessions. Gains were led by Chevron, up 1.23, or 1.6%, to 76.69, and Exxon Mobil, up 1.10, or 1.5%, to 72.94. Pacing the decline was Goldman Sachs, down 3.65, or 1.9%, to 188.63, and Citigroup, off 25 cents, or 5%, at 4.75. The Standard & Poor's 500 closed up 4.54, or 0.4%, at 1096.56. More broadly, energy stocks were helped by data showing a decline in fuel inventories, which sent oil sharply higher.

The positive finish on Wall Street lent support to Asian markets Friday, and they were mixed overall as investors waited for fresh leads from the U.S. companies reporting their earnings. Japan's Nikkei 225 was up 0.2%, with South Korea's Kospi Composite lower by 1.1%. Hong Kong's Hang Seng was up 0.1% while China's Shanghai Composite was 0.8% lower.

Overall trade was subdued before the weekend and amid signs of some fatigue in the market. Chinese shares were falling on concerns the imminent launch of the Growth Enterprise Market, a Nasdaq-style board, would divert cash from current stocks. "Speculative investors are cashing out to prepare for the launch of the secondary board in coming weeks," said Qian Qimin, an analyst at Shenyin Wanguo, who also noted massive subscriptions to new share offerings hurt liquidity as 19 firms built IPO books this week, raising a combined CNY7 billion.

In the European foreign exchanges, the dollar and the pound were firmer in early trade, with the yen lower. By 0635 GMT, the euro was trading at $1.4897, down from $1.4949 late in New York Thursday. The dollar was at Y90.90, up from Y90.56. Sterling was at $1.6300, up from $1.6263.

Elsewhere, spot gold fell $6.20 to $1047.80 per ounce. ScotiaMocatta said its technical analysis suggests that its lower close Thursday leaves gold facing a deeper correction. "With (Thursday's) lower close the reversal is confirmed; we expect to see liquidation of long gold positions over the coming days, with the initial pull back target seen at the former high, $1024."

Meanwhile, front-month Nymex crude oil futures were 25 cents higher at $77.83 per barrel. GA Global Markets broker Tony Rosado said oil was poised to break $79 before long, even though the supply-demand fundamentals weren't helpful. "The funds have the ball in their court," he said.

European bond markets opened on a weak note, with the December bund futures contract last seen at 121.19, down 0.24.