European Shares Advance on Strong Earnings, Confident Fed -- Update
May 04 2017 - 5:12AM
Dow Jones News
By Riva Gold and Ese Erheriene
European stocks and S&P 500 futures climbed Thursday on
upbeat corporate results and signs of a firming economy, brushing
off a steep drop in commodity prices.
The Stoxx Europe 600 was up 0.4% in morning trading while
Germany's DAX index rose 0.7% from a record high as earnings
reports pushed up the oil and gas and banking sectors.
Shares of Royal Dutch Shell PLC climbed 2.9% after the energy
giant said first-quarter profit more than quadrupled from a year
ago, while HSBC Holdings PLC rose 2.2% after reporting
better-than-expected first quarter profit.
Investors also drew encouragement from fresh signs of health in
the eurozone economy. IHS Markit raised its estimate for the
eurozone's composite purchasing managers indexes in April after a
six-year high in March. while data showed eurozone retail sales
rose for the third straight month.
A gauge of Italy's services sector meanwhile surpassed
expectations to reach its highest since 2007, sending Italy's FTSE
MIB index up 1.3%.
The euro climbed 0.3% against the dollar to $1.0923, not far off
its high of the year, while the British pound rose 0.1% to $1.2886
after the U.K.'s services index for April beat forecasts.
Futures pointed to a 0.2% opening gain for the S&P 500, as
investors also digested earnings from Facebook Inc. and Kraft Heinz
Co.
In government bonds, the gap between French and German bonds
narrowed to around its lowest since November in morning trading
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.
"The tone of the last French presidential debate was at times
aggressive but failed to produce the sort of slip-up that could
materially alter Macron's roughly 20 points lead," strategists at
Mizuho wrote. The final vote takes place May 7.
Yields on 10-year German government bonds rose to 0.365% from
0.327% on Wednesday while French yields edged up a bit less to
0.756% from 0.737%. Investors had sold French debt and bought
German debt earlier in the year to protect against the chance that
the country could elect a euroskeptic candidate and ultimately
leave the currency union. Yields move inversely to prices.
France's CAC-40 index was up 0.7%, while the wider Euro Stoxx 50
index of blue-chip eurozone companies climbed 0.6%, bringing this
year's gains close to 10%.
The WSJ Dollar Index, which tracks the dollar against a basket
of currencies, was last down 0.1% after rising 0.5% on Wednesday.
U.S. 10-year Treasury yields rose to 2.335% Thursday from
2.309%.
The dollar and government bond yields had inched higher
Wednesday after the Fed left interest rates unchanged 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.
"The key over the coming weeks will be the economic data from
the U.S.," said Lee Ferridge, head of multiasset strategy for North
America at State Street Global Markets.
Investors now price a 74% chance of a rate rise at the June
meeting, according to fed-funds futures tracked by CME Group, a
touch higher than before the meeting.
Gains in stocks on Thursday came despite a steep drop in
commodities prices that weighed on the basic resources sector, with
Brent crude oil last down 0.6% at $50.51 a barrel and metals prices
lower across the board amid concerns about Chinese demand for
commodities such as steel and iron.
A global fall in metals prices gained speed in Asian trading
Thursday as China's iron-ore futures opened at the 8% limit drop,
while copper futures in London were last down 0.4%, building on
Wednesday's steep declines. Gold fell 1% to $1,236 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 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% while markets across Asia
mostly moved lower. Benchmarks in Hong Kong and Singapore fell 0.1%
and 0.3% respectively, while 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 Thursday.
Paul Hannon and Yifan Xie contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at
ese.erheriene@wsj.com
(END) Dow Jones Newswires
May 04, 2017 05:57 ET (09:57 GMT)
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