Stocks Lifted by Upbeat Earnings, Stable Commodity Prices
May 09 2017 - 9:10AM
Dow Jones News
By Riva Gold and Kenan Machado
Global stocks were mostly firmer Tuesday, bolstered by upbeat
earnings reports and steadying commodity prices.
The Dow Jones Industrial Average added 13 points, or 0.1%, to
21025 shortly after the opening bell. The S&P 500 rose 0.1% and
Nasdaq Composite gained 0.2% after both indexes inched higher
Monday to settle at record highs.
Shares of Valeant Pharmaceuticals and Marriott International
rose after posting better-than-expected earnings, while shares of
Discovery Communications fell 4% on its results.
"There is a strong economic backdrop and robust earnings: That
environment is conducive to being invested [in stocks]," said
Mouhammed Choukeir, chief investment officer at Kleinwort
Hambros.
Mr. Choukeir favors European equities, where he says companies
are posting better-than-expected earnings in a healthy economy and
trade at lower valuations than their U.S. counterparts.
The Stoxx Europe 600 added 0.5%, on track for its best finish
since 2015. "People are starting to believe that maybe the European
story is back on its feet," he said.
Mining and energy companies led gains in Europe as Brent crude
oil steadied around $49.05 a barrel, while copper futures edged up
0.3% after falling for four of the last five sessions. Steep falls
in commodity prices -- -in part attributed to China's moves to
tighten credit -- -have been a source of worry for investors this
month. Europe's basic resources sector climbed 1.4% Tuesday, but
remained the month's worst-performing sector to date.
Shares of Commerzbank also gave a lift to Europe's banking
sector after it reported higher-than-expected profit and revenue in
the first quarter.
Across stocks markets, volatility has subsided, and investors
are betting that isn't likely to change in the near future. A
widely watched measure of investor anxiety, the CBOE Volatility
Index, fell to its lowest level since 1993 on Monday. The VSTOXX
measure of volatility implied by Euro Stoxx 50 options has also
dropped, last hovering around 14.2, down nearly 40% from a month
ago.
"Intraday moves have been relatively small compared to history,"
said Richard Crist, head of trading services at QMA, which manages
about $120.5 billion in assets. "Markets haven't really moved much
except when we've had commentary come out of Washington," he
said.
In currencies, the WSJ Dollar Index was up 0.4% ahead of
speeches from Federal Reserve officials. Cleveland Fed President
Loretta Mester on Monday called for the central bank to raise rates
and said it can likely start shrinking its holdings of bonds and
other assets later this year.
Fed-fund futures tracked by CME Group currently show investors
see a nearly 88% chance of a rate rise in June.
The euro extended declines and was last down 0.4% at $1.0878
after its biggest daily decline in more than a month, as traders
took profits following the expected victory of centrist candidate
Emmanuel Macron in France's presidential election on Sunday.
In bond markets, 10-year German bund yields inched up to 0.434%
from 0.417% and French yields climbed to 0.805% from 0.768% as
investors shifted focus from eurozone political risks to the
European Central Bank's next move. 10-year U.S. Treasury yields
rose to 2.402% from 2.376%. Yields move inversely to prices.
Earlier, Australia's S&P ASX 200 fell 0.5% as underwhelming
results from Commonwealth Bank of Australia and reports that the
Australian government would introduce a bank tax weighed on shares
of lenders.
Hong Kong's Hang Seng Index rose 1.3%, supported by a recovery
in shares of gambling companies and as Chinese markets pared losses
that had been stoked by concerns about a clampdown in speculative
trading. Stocks in Shenzhen were up 0.7% while the Shanghai
Composite Index was up 0.1% after five sessions of losses.
"We are approaching the end of the tightening cycle," said
Caroline Yu Maurer, head of Greater China Equities at BNP Paribas
Investment Partners.
"What [Chinese authorities] are trying to do is squeeze out some
of the irregularities without hitting liquidity."
Japanese stocks pulled back 0.3% after Monday's jump to 17-month
highs, despite a modest fall in the yen. Japanese wages fell for
the first time since last May, government data showed.
Bank of Japan Gov. Haruhiko Kuroda said he would act "quickly"
to expand stimulus measures if inflation loses traction, but noted
no additional steps are needed at the moment.
Saurabh Chaturvedi, Takashi Nakamichi,
Robb Stewart
and Suryatapa Bhattacharya contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at
kenan.machado@wsj.com
(END) Dow Jones Newswires
May 09, 2017 09:55 ET (13:55 GMT)
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