GLOBAL MARKETS: European Stocks Surge; US Earnings Lift Mood

LONDON -- European stocks rose strongly Wednesday, after an upside earnings surprise from Intel set a positive early tone for the technology sector, while basic-resources stocks soared.

By 0815 GMT, the pan-European Stoxx 600 had gained 1.3% to 245.15. London's FTSE 100 was up 1.3% at 5219.5, Frankfurt's DAX increased 1.2% to 5780.6 and Paris's CAC-40 was 1.1% higher at 3844.9.

"Many remain concerned that the strong run-up in prices means that we are overdue for a correction," said Bob Doll, global chief investment officer of equities at BlackRock.

"While we agree that corrective action could happen at any point... we also would reiterate that the flow of cash back into the markets, an equity-friendly macroeconomic backdrop and an encouraging earnings landscape all suggest markets will continue to grind higher."

The earnings and overall equities landscapes were certainly boosted by Intel, which provided a strong outlook for the rest of the year, even as third-quarter profits slid 7.8%. The results surpassed Wall Street's expectations, helped by a return of consumers to the PC market. The news sent the Stoxx Europe technology sub-sector sector upwards, and was last seen up 1.9% at 197.9.

In further earnings news, Dutch semiconductor equipment maker ASML Holding NV increased 1.0% at EUR21.8 after it reported a third-quarter net profit after three consecutive quarters of losses. However the company's chief financial officer said that despite the first-half of 2010 looking good, a recovery is needed in the world economy in the second half of the year.

Elsewhere, banks were also posting strong gains. Credit Agricole increased 2.6% to EUR14.8 after it said it will use funds from recent bond issues to help it reimburse EUR3 billion worth of state aid, received as the financial crisis took hold in December 2008.

The move follows similar plans announced by BNP Paribas and Societe Generale.

Separately, a note by Societe Generale reiterated its preference for investment banks over retail banks and said the third quarter should prove to be a robust quarter for underlying revenues and profits for the major players.

Bank stocks will be firmly in the minds of investors this week as key U.S. names are due to report.

Also the basic resources sector stormed ahead with spot gold last seen at $1067.40 per troy ounce, having hit a new high above $1070.0 earlier. In London, Kazakhmys led the blue-chip index, up 4.1%, followed by Xstrata, up 3.5%, and Vedanta Resources, 3.3% higher.

On Wall Street, stocks ended slightly lower Tuesday, weighed down by banking stocks after influential bank analyst Meredith Whitney downgraded shares of Goldman Sachs Group Inc. which reports results Thursday, to neutral from buy.

Overall, the Dow Jones Industrial Average closed down 0.2%, at 9871.1, marking its first drop in four sessions.

Among other indexes, the Standard & Poor's 500 slipped 0.3% to 1073.2, breaking a six-session winning streak. The Nasdaq Composite bucked the trend of a sliding stock market, finishing up 0.04%, at 2139.9.

However, for the second day this week, volume was particularly light, with NYSE Composite volume coming in at about 4.6 billion shares, compared with a 2009 average of nearly six billion. With earnings reports set to escalate in the next couple of days, traders were playing a waiting game.

"Everybody was waiting for Intel and what they were going to say," said Keith Springer, president of Capital Financial Advisory Services. "Intel's a real barometer for growth as it's technology, which has been a strong sector."

The upbeat news from Intel helped Asian share markets to end mostly higher Wednesday, boosted by gains in technology stocks in South Korea and Taiwan.

Australia's S&P/ASX 200 closed up 1.0% and Korea's Kospi Composite up 1.2%, although Japan's Nikkei 225 fell 0.2% after its recent run of gains. Hong Kong's Hang Seng index gained 1.9% and the Shanghai Composite ended 1.2% higher.

In the currency markets, the euro rose to a 14-month high against the dollar Wednesday amid broad greenback weakness due to growing risk appetite and expectations the Federal Reserve will keep interest rates low for at least the next year.

U.S. Federal Reserve vice chairman Donald Kohn said overnight, in a speech in St. Louis, that he expects "the persistence of economic slack, accompanied by stable longer-term inflation expectations, will keep inflation subdued for some time."

This added to the surge of risk appetite generated by the strong Intel earnings, helping riskier currencies higher.

At 0820 GMT, the euro stood at $1.4886, up from $1.4854 late Tuesday in New York, while the dollar stood at Y89.26, down from Y89.71. The dollar index, which measures the currency's value against six major units including the euro, was at 75.603, down from 75.95 in New York, after marking a fresh 14-month low at 75.55.

Meanwhile, in the oil market, the November Nymex crude oil futures contract gained 76 cents to $74.91 per barrel, after trading above $75 a barrel for the first time since Aug. 25.

European government bonds were weaker, hit by the renewed demand for risk and ahead of the latest round of government debt issuance. The December bund contract stood at 122.19, 0.36 lower.

Economic data may also help to provide further direction in Europe. The U.K. unemployment rate is due at 0830 GMT, followed by euro-zone industrial production at 0900 GMT.