Stocks reverse declines with focus on earnings: markets wrap

Gold futures rose 0.3% to $1 817.90 an ounce.
Image: Michael Nagle/Bloomberg

US futures and European equities reversed a selloff on Wednesday as earnings optimism offset concerns about rising bond yields.

Contracts on three US benchmarks and Europe’s Stoxx 600 Index erased earlier losses to trade slightly higher. Retailers led gains in Europe after Richemont and Burberry Group Plc beat expectations, while bank stocks were mixed in premarket trading after Bank of America Corp. reported earnings. Asian stocks fell for a fifth day.

Surging Treasury yields are stirring expectations that the US 10-year will top 2%. Speculation is growing that the Federal Reserve may deliver more than a quarter-percentage point March interest-rate hike to fight inflation, while the Bank of England may move again next month.

Britain’s inflation rate surged unexpectedly to the highest since 1992 and Germany’s 10-year yield turned positive for the first time since 2019.

A dollar gauge edged lower. Oil held gains above the highest close since 2014 as the International Energy Agency said the market looked tighter than previously thought, with demand proving resilient to the omicron virus strain.

In China, where policy is diverging from the US, the central bank has pledged to use more monetary policy tools to aid the economy and ease credit stress amid a real-estate slump.

All eyes are now on earnings, with Morgan Stanley, UnitedHealth Group and Netflix among companies publishing during the week. Global equities have had a volatile start to the year, hurt by a more hawkish Fed stance, economic disruptions from omicron and risks to company profits due to rising costs. Higher bond yields are forcing investors to rethink valuations across a range of assets.

“We are in late stage of the cycle, where equities will post lower returns due to weaker growth and higher rates, but we expect the ongoing correction to be short,” Luca Paolini, chief strategist at Pictet Asset Management, said by email. He’s forecasting the S&P 500 index and US 10-year yields at 2% by the end of the year.

What to watch this week:

  • Morgan Stanley, UnitedHealth Group and Netflix are among companies publishing earnings during the week
  • US data includes housing starts Wednesday and jobless claims Thursday
  • Interest-rate decisions due from nations including Indonesia, Malaysia, Norway, Turkey and Ukraine, Thursday
  • EIA crude oil inventory report, Thursday

Some of the main moves in markets:

Stocks

  • Futures on the S&P 500 rose 0.3% as of 7:05 a.m. New York time
  • Futures on the Nasdaq 100 rose 0.4%
  • Futures on the Dow Jones Industrial Average rose 0.2%
  • The Stoxx Europe 600 rose 0.4%
  • The MSCI World index fell 1.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The euro rose 0.1% to $1.1340
  • The British pound rose 0.3% to $1.3633
  • The Japanese yen rose 0.1% to 114.49 per dollar

Bonds

  • The yield on 10-year Treasuries advanced one basis point to 1.88%
  • Germany’s 10-year yield advanced two basis points to 0.00%
  • Britain’s 10-year yield advanced five basis points to 1.27%

Commodities

  • West Texas Intermediate crude rose 1.3% to $86.55 a barrel
  • Gold futures rose 0.3% to $1 817.90 an ounce
© 2022 Bloomberg

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