Santa Claus rally begins on world markets

Equities on Wall Street advanced as better-than-expected earnings forecasts and M&A bolstered investor confidence that stocks were relatively cheap.

The Standard & Poor's 500 Index gained for a fourth day. The benchmark has now fully recovered from September 12, 2008, the last trading session before Lehman Brothers filed the world's biggest bankruptcy and sent stock markets worldwide into a tailspin.

Among companies boosting confidence in the outlook for corporate earnings was Adobe Systems, which jumped more than 4 per cent after the No. 1 maker of graphic-design programs forecast fiscal first-quarter profit that surpassed analysts' expectations.

Electronics manufacturer Jabil Circuit climbed 10 per cent after posting better-than-expected quarterly profit and forecasting a robust second quarter.

"This is your Santa Claus rally," Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, told Reuters. "Everybody is coming in, you are clicking on all eight cylinders here."

Mendelsohn said the psychology had changed and that money was pouring into stocks from bonds as the economic outlook continued to improve.

Takeover action also pushed equities on both sides of the Atlantic along.

Toronto-Dominion Bank agreed to buy Chrysler Financial from private equity firm Cerberus Capital Management for US$6.3 billion. The second billion dollar investment by a Canadian bank in the US in a week.

Massey Energy rose on a Wall Street Journal report that rival Alpha Natural Resources offered to buy the US coal miner.

Martek Biosciences soared 35 per cent after Dutch Royal DSM NV, the world's largest vitamins maker, agreed to buy the US- based maker of baby food ingredients.

"There's increased confidence in what the future looks like, at least in the US.," James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, which oversees US$105 billion, told Bloomberg.

The benchmark Stoxx 600 rose 1 per cent to 281.11, bringing its gain so far this month to 7.4 per cent.

Investors drew confidence from comments by China's Vice Premier Wang Qishan who said Beijing "has taken steps to help some EU member counter the sovereign debt crisis" and that he held out hope a turning point was near.

China has invested an undisclosed portion of its US$2.65 trillion reserves in the euro. Qishan's comments helped drive the euro above US$1.32 and regain its 200-day moving average. The euro recently was up 0.3 per cent to US$1.3159.

Tempering gains was Moody's Investors Service's warning that it might downgrade Portugal's A1 rating by one or two notches after a review that would take up to three months.

Analysts still expect the euro to gradually slide toward US$1.30 in the coming days.

Meanwhile, copper advanced to the highest price in more than two decades after China's imports gained for the first month in three and supplies were disrupted at the Collahuasi copper mine, the world's third biggest, in Chile.

New York futures for March delivery rose as much as 2 per cent to US$4.2895 a pound, the highest price for a most-active contract since at least December 1988.

Copper for delivery in three months on the London Metal Exchange rose to a record US$9,392 a metric ton earlier in the session.

It last traded at US$9,344.