US stocks made solid gains on Thursday after merger activity boosted technology stocks. A pullback in oil prices reduced concerns over inflation, while speculation of a deal on a housing rescue plan lifted the market.
Late in the session, rumours emerged that key members of the US Senate had reached a deal on a housing rescue plan. Under the deal Fannie Mae and Freddie Mac would provide funds to support a federal mortgage insurance fund, according to industry sources.
The Dow gained 94.28, or 0.73% to 12992.66. The S&P 500 picked up 14.91, or 1.06% to 1423.57 and the NASDAQ added 37.03, or 1.48% at 2533.73, with both indices achieving their highest closes since early January.
Investors piled into technology stocks after financier Carl Icahn started a proxy battle to get control of Yahoo! and force it to strike a deal with Microsoft. Yahoo! closed up 2.3% and Microsoft increased 1.2%.
In other M&A news, internet company CNET Networks jumped 43.5% on news CBS is buying the company for US$1.8 billion in cash, a deal that will make CBS one of the top 10 Web companies in the United States. CBS slipped 2.4%.
A variety of big technology shares rose, including Apple which added 1.9%. Intel, Hewlett-Packard and Cisco Systems increased 4.7%, 2.4% and 2.9% respectively.
Retailers benefitted after JC Penney said its earnings in the current quarter could top analysts' forecasts. The outlook drove JC Penney's battered stock up 4.7% even though it posted a 50% profit drop in the first quarter.
General Electric was also in the spotlight after reports that it had hired Goldman Sachs to look at selling or seeking a partner for its appliances unit. GE shares fell 0.4%.
Crude oil futures settled slightly lower on Thursday after sinking to below US$122 a barrel during the session. NYMEX light crude for June delivery fell US10c to settle at US$124.12, Traders said a surprisingly large increase in US natural gas inventories contributed to crude's fall.
COMEX gold for August delivery added US$13.50 to US$880 an ounce.
In economic related news , the number of Americans filing new claims for unemployment rose 6,000 last week to 371,000, just topping forecasts for a rise to 370,000.
The NY Empire State index, which measures manufacturing in the New York region, came in at minus 3.2, versus forecasts for a flat reading. Any negative reading indicates weakness in the sector.
Meanwhile, the Philadelphia Fed index, which measures manufacturing in the Philadelphia area, came in at minus 15.6 for May, versus forecasts for a reading of minus 19.
UK Markets
UK shares gained 0.6% on a flurry of positive earnings announcements. Resource firms also contributed the day’s gains, rallying on near record crude and rising metals prices.
The benchmark FTSE 100 gained 35.80, or 0.58% to 6251.80.
BT was among the day’s top performers, climbing 5.4% after the teleco posted a rise in fourth-quarter underlying core earnings, in line with forecasts. The company said it expected to deliver continued growth next year.
In other earnings related movement, SABMiller tacked on 3.9% after beating forecasts with a 19% rise in annual earnings. The world's biggest brewer also said it expects to raise beer prices to offset soaring commodity costs.
Cadbury added 3.9% after it said first-half growth in confectionery sales would beat its 4% to 6% target range. The confectioner also gained on persistent merger talk.
On the downside, Barclays fell 2% after announcing that profits fell in the first quarter, weighed by a 1 billion pound write down. The bank didn’t offer specifics about the size of the profit decline, nor did it rule out a rights issue.
Elsewhere in the sector, HBOS, Lloyds and Alliance & Leicester lost between 0.4% and 1.4%. Royal Bank of Scotland, trading ex-rights, edged 0.7% higher.
Among commodity stocks, BHP Billiton gained 2.6% and Rio Tinto added 2% in UK trade. Oil producers, Royal Dutch Shell and BP gained 0.2% and 0.6% respectively.
Looking to other major movers, Thomas Cook shed 5.1% even as it became the latest travel firm to say that Europeans' appetite for summer holidays remains undimmed, despite fears of a consumer downturn.
European Markets
European markets were mostly flat on Thursday despite reports of healthy economic growth in both Germany and France for the first three months of the year. Weakness among financial stocks dulled any enthusiasm generated positive corporate news from some pharmaceuticals.
France’s CAC 40 added 2.27, or 0.04% to 5057.51, while Germany’s DAX fell 2.19, or 0.03% to 7081.05.
Shares in Credit Agricole fell 1.3% after France's biggest retail bank confirmed a 5.9 billion euro rights issue and said it would sell assets and restructure its Calyon investment banking arm.
Belgian banking and insurance group KBC fell 6% after posting a fall in earnings and temporarily suspending its share buyback programme. Meanwhile, BNP Paribas fell 0.3% and Societe General shed 0.4%.
But French peer Natixis bucked the trend to jump 17% after it avoided making a loss in the first quarter.
Also on the upside, Roche Holding rose 2.5% and Novartis gained 1.7% on hopes for key cancer drug trials due to be presented at a research meeting at the end of the month.
Meanwhile, Vivendi, Europe's largest entertainment group, jumped 5.2% after posting a smaller-than-expected drop in first-quarter operating profit late on Wednesday.
Japanese Markets
Japanese stocks rallied 0.9% to hit a four-month closing high, buoyed by the likes of Sony, which offered an upbeat outlook. Steel makers were also positive, lifted by news of a deal struck with Toyota.
Japan’s benchmark Nikkei 225 gained 133.19, or 0.94% to 14251.74.
Nippon Steel jumped 7% on reports that Toyota agreed with it and other top Japanese steel makers to pay over 30% more for sheet steel. Toyota gained 1.9%.
Late on Wednesday, Sony said it suffered an operating loss of 4.7 billion yen in the March quarter as the weak stock market diminished the value of securities held by its finance arm.
However, its shares jumped 8.7% after the company said it expected operating profit to grow 20% in the year to March 2009. The upbeat outlook came despite hurdles such as a slowing US economy and a stronger yen.
Elsewhere, No 2 bank Mizuho Financial Group added 3.9% as it planned an effective 10-for-1 stock split.
Hong Kong Markets
Hong Kong stocks slipped on Thursday, in line with Shanghai's index, as cautious investors shrugged off regional gains and offloaded shares. Investors had largely digested the impact from China's devastating earthquake and their focus was turning back to inflation worries on the mainland.
The blue chip Hang Seng Index closed down 0.08%, or 19.77 points, at 25,513.71. Hong Kong’s benchmark index has rebounded about 24% from its low in mid-March, but is down more than 8% on the year so far.
Ports-to-telecom conglomerate Hutchison topped the list of most heavily traded stocks, jumping 5.5% on an upgrade from Citigroup.
Selling in index heavyweights such as China Mobile, which lost 0.3%, and China Life, down 0.6%, offset gains in PetroChina.
PetroChina, the second most heavily traded stock, rose 2.2%. The oil refiner said one third of quake-affected gas production had been restored but oil supplies were running short..
