Stocks Rise Ahead of U.S. Bank Earnings -- Update
October 14 2016 - 4:52AM
Dow Jones News
By Jon Sindreu
European stocks edged higher Friday led by financial companies,
ahead of earnings reports that are expected to shed light on the
health of U.S. banks and the broader economy.
The Stoxx Europe 600 rose roughly 1.2% in morning trade. Gains
were led by European banks, which rose 2%.
The biggest gainer was London-based Man Group PLC, the world's
largest listed hedge-fund firm by assets. It was up 14% after it
reported a powerful rise in funds under management and announced
the purchase of real-estate investment manager Aalto Invest Holding
AG.
In the U.S., futures markets pointed to a 0.2% opening gain for
the S&P 500. J.P. Morgan Chase & Co., Citibank Inc. and
Wells Fargo & Co. are all scheduled to report their
third-quarter earnings later in the day, amid signs that the U.S.
economy has been strengthening and the Federal Reserve is ready to
increase borrowing costs in December--federal-funds futures now
point at a 65% chance this will happen by then.
"I would like to see normalization sooner rather than later,"
Federal Reserve Bank of Philadelphia President Patrick Harker said
Thursday.
Higher interest rates could be a threat for stocks unless the
economic outlook improves, so a key factor for U.S. markets is
whether this earnings season will rebound from five consecutive
quarters of declines. So far, reports have been slightly
disappointing for investors.
"It's early days so far," said Brad MacMillan, chief investor at
Commonwealth Financial Network, who is optimistic stocks will be
able to weather the transition towards higher rates.
"It's starting to look like we will indeed be able to make that
handoff, " he added.
Investors will also be monitoring U.S. retail sales figures to
gauge the strength of consumer spending, a key driver of economic
growth.
Expectations of higher interest rates have pushed up the U.S.
dollar, which has gained 1.7% against the euro and 1.1% against the
yen over the last week.
A weaker yen was a boon for the Japanese Nikkei Stock Average,
which was up almost 0.5% in the late afternoon. Asian stocks more
broadly had a small rebound after a negative week, which had been
driven by lackluster Chinese trade data.
Data released Friday, however, revealed that Chinese producer
prices turned positive for the first time since 2012, an
encouraging sign for markets. Hong Kong's Hang Seng Index gained
1%.
The People's Bank of China has pushed the yuan to its lowest
level against the dollar since 2010, but investors appear much less
concerned than they were about a sudden depreciation of the Chinese
currency.
"It is remarkable how lightly markets have taken it considering
how worried they were about it at the beginning of the year," said
Valentijn van Nieuwenhuijzen, head of strategy at NN Investment
Partners.
Thailand's SET index rose a powerful 4.2% after the death of
King Bhumibol Adulyadej on Thursday. The monarch's health had
prompted concerns of political instability, weighing on stocks
earlier in the week.
In the U.K., the FTSE 100 was bolstered by the pound weakening
0.25% against the U.S. dollar, since foreign revenue generated by
multinational companies listed on the British index should look
beefier once it is translated into sterling.
The pound is down almost 2% since the start of the week and 18%
below where it was when Britons voted to leave the European Union
on June 23, as recent comments by U.K. officials have failed to
reassure investors that the country's separation from the bloc
won't have an impact on trade and migration.
"We don't see a rebound at all," said Stephen Gallo, European
head of currency strategy at BMO Capital Markets. "What concerns us
is that the brinkmanship tactics in both sides, the U.K. and the EU
side, doesn't look like they are going to fade in the medium
term."
The price of oil continued to rise on the back of expectations
of the world's main producers keeping a tighter grip on supply. The
Brent crude barrel traded at around $52.43 in early European
trading.
Write to Jon Sindreu at jon.sindreu@wsj.com
(END) Dow Jones Newswires
October 14, 2016 05:37 ET (09:37 GMT)
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