(Updates prices after Citigroup's results)
By Ian Chua
LONDON, April 18 (Reuters) - European stocks extended gains
on Friday while the dollar strengthened after Citigroup posted a
first-quarter loss that was not as heavy as some had predicted,
setting the scene for a positive start on Wall Street.
Citigroup's <C.N> shares rose 6 percent in pre-U.S. market
trade after the largest U.S. bank posted a first-quarter loss of
$5.11 billion, hurt by write-downs and increased revenues for
credit losses.
"Generally, it is regarded as better than expected. The
writedown was $6 billion which wasn't too bad ... for the
markets it's quite a good news," said Mark Foulds, head of
equity sales at TradIndex in London.
The $6 billion in writedowns contrasted sharply with market
rumours for writedowns approaching $22 billion.
European stocks, already buoyed by talk that the Royal Bank
of Scotland <RBS.L> would announce a rights issue next week,
added to early gains.
"Banks are taking action to shore up their capital position
and that means they must have a better idea of precisely what
exposure they have," Justin Urquhart Stewart, an investment
director at Seven Investment Management.
"They can only come to the market once, you can't keep
coming back and doing it."
The FTSEurofirst 300 <> index of top European shares
rose 1.5 percent with Britain's FTSE <> gaining 0.9 percent
and Germany's DAX <> adding 1.4 percent.
Bank stocks such as Societe Generale <SOGN.PA> and BNP
Paribas <BNPP.PA> both rose more than 3 percent, while RBS
shares gained 1.4 percent.
U.S. stock index futures <SPc1><DJc1><NDc1> were all up
between 0.5 and 1 percent, suggesting a stronger start for the
U.S. market.
Better-than-expected earnings from Internet leader Google
Inc <GOOG.O> after the U.S. closing bell on Thursday also helped
lift sentiment.
Earlier, Japan's Nikkei <> rose 0.6 percent but MSCI's
measure of other Asian stock markets <.MIAPJ0000PUS> slid 0.6
percent. MSCI world equity index <.MIWD00000PUS> edged up 0.3
percent.
Gains in stocks weighed on demand for safe-haven government
bonds, pushing yields higher. The 10-year Bund yield <EU10YT=RR>
climbed 2.7 basis points to 4.110 percent, while the yield for
the benchmark 10-year U.S. Treasuries <US10YT=RR> put on 4.7
basis points to 3.807 percent.
DOLLAR REBOUNDS
Citi's results also helped boost the dollar, which rebounded
against a basket of major currencies. The dollar index <.DXY>
reversed early losses to be up 0.4 percent.
Against the yen, the greenback added 0.8 percent to 103.32
yen <JPY=> on the day, while the euro <EUR=> fell 0.3 percent to
$1.5844.
"Generally speaking we're now seeing results coming in
broadly in line with those downward revisions and in some cases
there have been some positive surprises," Ian Stannard, senior
currency strategist at BNP Paribas in London.
"Although the knee-jerk reaction may be for a positive
dollar, that's not necessarily a positive over the medium term.
If we do see risk appetite picking up once again that would
suggest that the dollar could come back under pressure."
Indeed, further gains in the interbank cost of borrowing
three-month dollars showed persistent stress in the money
markets. Three-month dollar Libor rose to 2.90750 percent from
2.81750 percent, its biggest rise since August 2007, when the
credit crisis began.
The firmer dollar weighed on some commodities. Copper
<MCU3=LX> gave up early gains to be down 1.2 percent and both
oil and gold drifted lower.
U.S. crude <CLc1> fell 71 cents to $114.15, retreating from
a record high of $115.54 a barrel set on Thursday, while gold
slipped to $933.70 from about $939.00 in late New York trade on
Thursday.
(Additional reporting by Dominic Lau and Veronica Brown;
editing by David Christian-Edwards)
