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US futures steady as earnings season approaches: markets wrap

Treasury yields stabilised after Friday’s jump.
Image: Soichiro Koriyama/Bloomberg

US futures fluctuated and stocks in Europe ticked higher as investors turn their attention to the second-quarter earnings season starting this week in order to gauge whether corporate profitability can support equity valuations. Treasury yields stabilised after Friday’s jump.

The Stoxx Europe 600 posted a modest advance at the open, with gains for utilities and real-estate companies offsetting declines for banks and carmakers. Contracts on the S&P 500 edged lower, while those on the Nasdaq 100 were little changed.

Treasuries snapped an eight-session rally Friday that saw 10-year yields tumble as low as 1.25% in a volatile week. They will remain in focus amid new supply coming to the market this week, as well as key US inflation data and Federal Reserve Chair Jerome Powell’s semi-annual appearance before Congress. The dollar edged higher against major peers.

Equities and bonds have rallied amid a decline in long-term interest rates and inflation expectations as central banks aren’t rushing to pull back stimulus that has helped a recovery from the pandemic. Still, investors remain concerned about the spread of delta variant and a slowdown in vaccination rates, while pondering when the Fed will start tapering stimulus.

“There does seem to be a complacency that Goldilocks is not only alive and well, but that it’s getting stronger by the day,” Simon Ballard, First Abu Dhabi Bank chief economist, said on Bloomberg Television. “Unfortunately, it has to be recognised that going forward, the longer that rates remain where they are, the more that we look toward tapering, the more severe and acute could be the reaction.”

Elsewhere, Asian stocks rose at the start of the week after China’s central bank moved to boost liquidity by cutting the amount of cash most banks must hold in reserve to buttress economic growth.

The euro was little changed after European Central Bank President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days. Oil extended a decline after its first weekly loss in seven amid an OPEC+ dispute over a production increase.

Here are some events to watch this week:

  • Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley are among firms starting the US earnings season.
  • A closely-watched inflation metric — the June US consumer price index — will offer insight into the inflationary pressures Tuesday.
  • The Reserve Bank of New Zealand’s latest interest rate policy Wednesday.
  • Bank of Korea monetary decision Thursday.
  • China second-quarter GDP, key economic indicators Thursday.
  • Federal Reserve Chair Jerome Powell appears before the Senate Banking Committee to deliver the semi-annual Monetary Policy Report to Congress Thursday.
  • Bank of Japan interest rate decision Friday.

These are some of the main moves in financial markets:

Stocks

  • Futures on the S&P 500 were little changed as of 8:16 a.m. London time.
  • Futures on the Nasdaq 100 rose 0.1%.
  • Futures on the Dow Jones Industrial Average fell 0.1%.
  • The Stoxx Europe 600 rose 0.2%.
  • The MSCI World index rose 0.2%.

Currencies

  • The Bloomberg Dollar Spot Index was little changed.
  • The euro was little changed at $1.1870.
  • The British pound was little changed at $1.3893.
  • The Japanese yen was little changed at 110.21 per dollar.

Bonds

  • The yield on 10-year Treasuries declined one basis point to 1.35%.
  • Germany’s 10-year yield was little changed at -0.30%.
  • Britain’s 10-year yield was little changed at 0.65%.

Commodities

  • West Texas Intermediate crude fell 0.3% to $74.30 a barrel.
  • Gold futures fell 0.6% to $1 799.90 an ounce
© 2021 Bloomberg

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