Bloomberg News

Australian Commodity Shares Rise, Japan Stock Futures Unchanged

October 24, 2011

Oct. 25 (Bloomberg) -- Australian commodity shares rose and Japanese stock futures were little changed after Caterpillar Inc.’s earnings beat estimates and confidence grew that Europe will contain its debt crisis, boosting the outlook for Asian exporters.

American depositary receipts of Komatsu Ltd., Japan’s largest construction machinery maker, rose 2.7 percent from the closing share price in Tokyo. Those of Sony Corp., Japan’s No. 1 exporter of consumer electronics that gets 42 percent of its revenue in Europe and the U.S., advanced 1 percent. BHP Billiton Ltd., Australia’s largest oil producer, gained 2.2 percent after crude prices increased.

Australia’s S&P/ASX 200 Index advanced was little changed after rising as much as 0.3 percent in early trading today. Futures on Japan’s Nikkei 225 Stock Average expiring in December closed at 8,840 in Chicago yesterday, unchanged from 8,840 in Osaka, Japan. They were bid in the pre-market at 8,830 in Osaka at 8:05 a.m. local time. New Zealand’s NZX 50 Index gained 0.7 percent in Wellington.

“One of the most positive signs of the rally is the fact that it was not solely built on Europe optimism,” said Stan Shamu, a strategist at IG Markets in Melbourne. “The fact that U.S. companies are continuing to report strong earnings and are flush with cash is a very bullish sign going forward. Investors are increasingly beginning to believe that European leaders will succeed in preventing a spread of the region’s debt crisis.”

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today after the index rose 1.3 percent yesterday in New York. Caterpillar rallied 5 percent to $91.77. The company said full- year profit will be $6.75 a share and sales will be at the top end of a previously forecast range of $56 billion to $58 billion.

U.S. Earnings

This week, 191 companies in the S&P 500 are scheduled to report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.34 a share for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ projections, the data showed.

Boosting the effectiveness of Europe’s bailout fund will require further talks with investors as German lawmakers prepare to vote on its new powers tomorrow, a European Union document showed.

While the European Financial Stability Facility can be bolstered under two models that may be combined and implemented “quickly,” the extent to which the fund is leveraged can only be ascertained after discussions with investors and rating companies, the document provided to German lawmakers said.

‘Dominant Factor’

“Clearly, the dominant factor is what’s happening in Europe,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “At this stage, I think there is some superficial optimism that some sort of deal might be reached. Underneath the surface, though, I think investors still have a lot of questions in the back of their minds and they are alert to risks. Most investors want to get their minds around details tomorrow.”

The MSCI Asia Pacific Index declined 13 percent this year through yesterday, compared with a 0.3 percent loss by the S&P 500 and a 12 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.4 times for the Stoxx 600.

Crude for December delivery rose $3.87 to $91.27 a barrel on the New York Mercantile Exchange, the highest settlement price since Aug. 3.

--Editors: John McCluskey, Jason Clenfield.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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