European Shares Advance on Strong Earnings, Confident Fed -- 2nd Update
May 04 2017 - 9:37AM
Dow Jones News
By Riva Gold
European stocks and Wall Street futures climbed Thursday on
signs of economic growth and upbeat corporate results, brushing off
a steep drop in commodity prices.
Futures pointed to a 0.3% opening gain for the S&P 500 and
Dow Jones Industrial Average despite a sluggish lead from Asian
markets, as investors reflected on the Federal Reserve's vote of
confidence in the economy and parsed a fresh set of earnings
reports.
The U.S. central bank left interest rates unchanged on Wednesday
but said it expected the economy to rebound from a soft first
quarter, signaling it is likely to continue gradually raising rates
this year if the data hold up.
Shares of American International Group moved higher in
pre-market trading after swinging to a profit, extending a mostly
positive earnings season, but shares of Facebook Inc. and Tesla
Inc. slipped.
Upbeat economic data from Europe also lifted stocks Thursday
despite a sluggish lead from Asian markets. The Euro Stoxx 50 index
of blue-chip eurozone companies was up 0.8% in afternoon trading,
on track for its best finish since 2015, after a measure of
activity in the eurozone's manufacturing and services sectors rose
to a six-year high and retail sales figures improved.
"For the first time since the European sovereign debt crisis
broke out, we have a synchronized economic upswing in almost all
continental European economies," said Frank Engels, head of
multi-asset portfolios at Union Investment.
Germany's benchmark DAX index was up 0.8%, on track for another
record close, while stocks in Italy jumped 1.5% after a gauge of
Italy's services sector reached its highest in a decade. The euro
climbed 0.3% to $1.0922, not far off its best level this year,
while the British pound rose 0.1% to $1.2885 after U.K. business
surveys picked up speed.
Earnings reports also pushed stocks higher in Europe, with
shares of Royal Dutch Shell PLC up 1.7% after the energy giant said
first-quarter profit more than quadrupled from a year ago, and HSBC
Holdings PLC up 4.1% after its results raised expectations for
share buybacks.
Government bonds remained under pressure Thursday as investors
solidified expectations for the Fed to raise rates next month.
Fed-fund futures tracked by CME Group suggest investors now see a
78.5% chance of a rate rise in June.
Yields on 10-year Treasurys rose to 2.350% Thursday from 2.309%,
while the WSJ Dollar Index, which tracks the dollar against a
basket of currencies, was little changed after rising 0.5% on
Wednesday.
Investors were also watching political developments after House
Republican leaders said the chamber would vote Thursday on their
bill to replace most of the Affordable Care Act and French
candidates faced off in a debate ahead of presidential
elections.
The gap between French and German bonds narrowed to around its
lowest since November on Thursday following a live head-to-head
debate between French presidential candidates Emmanuel Macron and
Marine Le Pen late Wednesday, which analysts said kept Mr. Macron
in the lead.
"More and more [investors] believe there is almost no risk
entailed in the second round of the French election," said Mr.
Engels, pointing to the accuracy of the polls in the first round of
the vote.
Stock-market gains Thursday came despite a steep drop in
commodities prices that weighed on mining shares, with Brent crude
oil last down 1.8% at $48.87 a barrel and metals prices lower
across the board.
A global fall in metals prices gained speed in Asian trading
Thursday amid concerns about Chinese demand for commodities such as
steel and iron. China's iron-ore futures opened at the 8% limit
drop, while copper futures in London were last down 1.2% and gold
fell 1.6% to $1,229 an ounce.
A Caixin reading on China's service-sector activity hit its
lowest level in nearly a year for April on Thursday, adding to
concerns about the country's economic health, though it remained in
expansion territory.
"China has been gradually but appreciably tightening credit,"
said Tina Byles Williams, chief investment officer and chief
executive at FIS Group, noting that is slowly showing up in
economic data and metal prices.
"I don't see catastrophe, but I do think there's a lot of
complacency in emerging market assets around China," she said.
The Shanghai Composite Index fell 0.3%, ending lower for a third
straight session while benchmarks in Hong Kong and Singapore fell
0.05% and 0.3% respectively. Australian stocks shed 0.3% amid
worries about banks' earnings and weakness in the mining
sector.
South Korean equities powered to record highs, however, adding
1% Thursday as index heavyweight Samsung advanced.
Japan's markets were closed for a holiday.
--Ese Erheriene,
Paul Hannon
and
Yifan Xie
contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
May 04, 2017 09:22 ET (13:22 GMT)
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