Asian stocks rise on better-than-expected results of Europe’s bank ‘stress tests’

 

Pamela Sampson, Associated Press Writer, On Monday July 26, 2010, 1:12 am EDT

BANGKOK (AP) — Asian stock markets posted moderate gains Monday following reassuring news that most European banks passed much-anticipated “stress tests,” suggesting the continent’s banking system is strong enough to weather a massive debt crisis.

 

Oil prices hovered above $79 a barrel as regional stock markets extended a rally from last week amid improving investor optimism. The dollar edged up against the yen; the euro strengthened.

 

Japan’s Nikkei index turned in the strongest showing, up nearly 1 percent amid a report showing that exports from the world’s No. 2 economy rose for the seventh straight month in June. Other major indexes — including Hong Kong’s Hang Seng and South Korea’s Kospi — were up, but not as vigorously.

 

Investors took heart from Friday’s results out of Europe that only seven out of 91 banks flunked the tests. But some analysts said the stress test results were widely anticipated and even questioned whether they were stringent enough to yield an accurate picture of the continent’s financial sector.

 

Because the results were issued after the close of trading in Europe, it won’t be known until later Monday how investors on the continent react, but the response in Asia was tepid.

 

“The markets are still neutral to the news,” said Castor Pang, director of research at Cinda International in Hong Kong. “We don’t see any big jump or drop in Asia’s trading session.”

 

Steven Leung, director of institutional sales at UOB-Kay Hian Ltd., said China’s policy on credit and earnings reports out of the U.S. this week would be the driving factors in this week’s market performance. Some investors expect China to announce it is loosening credit curbs to pep up slowing economic growth.

 

“This week, we are watching for another round of earnings out of the U.S.,” Leung said. “People are waiting for another round of signals.”

 

On Friday, earnings reports and the Europe bank stress tests lifted stocks as the Dow Jones industrial average gained 102.32 points, or 1 percent, to 10,424.62. Verizon, Ford and American Express Co. reported figures that topped forecasts. A day before, stocks surged after Caterpillar Inc., UPS Inc. and other companies released positive results and forecasts.

 

Japan’s benchmark Nikkei 225 stock average gained 80.93 points, or 0.9 percent, to 9,512.36, led by gains in financial stocks. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, rose 0.7 percent and Sumitomo Mitsui Financial Group gained 0.4 percent.

 

South Korea’s Kospi added 0.4 percent to 1,765.24 amid news its economy expanded more than 7 percent from a year earlier in the second quarter. Australia’s S&P/ASX 200 was up 0.7 percent at 4,489.10.

 

Elsewhere, Hong Kong’s Hang Seng climbed 0.2 percent to 20,860.01, and markets in Taiwan, Indonesia and the Philippines also advanced. China’s Shanghai Composite Index dropped 0.5 percent to 2,559.59. Markets in Singapore and Jakarta also were down.

 

In currencies, the dollar edged up to 87.60 yen in Tokyo from 87.43 in New York late Friday. The euro gained to $1.2924 from $1.2901.

 

Benchmark crude for September delivery was up 15 cents at $79.13 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 32 cents to settle at $78.98 on Friday.