Earnings Give Stocks a Bump
April 17 2018 - 6:10AM
Dow Jones News
By Riva Gold and Ese Erheriene
-- Netflix shares jump in premarket trading
-- Asian tech under pressure following ZTE action
-- Sterling around post-Brexit high
U.S. stock futures and European shares climbed Tuesday with
support from strong corporate results, even as warnings from
Western governments over a Chinese telecommunications-equipment
giant put pressure on Asian markets.
The Stoxx Europe 600 edged up 0.4% after Wall Street closed
higher Monday in the lowest-volume day so far this year. Stock
futures pointed to continued gains in the U.S. later Tuesday, with
S&P 500 and Dow Jones Industrial Average futures up 0.4% and
0.5%, respectively.
Helping boost sentiment around U.S. stocks, Netflix shares
jumped 7% in premarket trading after reporting subscriber growth
that beat its own forecast and analysts' expectations.
"The FANGs [ Facebook, Amazon.com, Netflix and Alphabet] are
very important; they seem to be a barometer for all stocks," said
Christopher Peel, chief investment officer at Tavistock
Investments. In light of recent pressure on technology companies,
"the tech sector is vulnerable to a selloff if any of the big five
or six companies have a miss [on earnings]," he said.
Results from Netflix are also the first real gauge of whether
world-wide demand picked up in the first quarter, said JJ Kinahan,
chief market strategist at TD Ameritrade. "You really want to hear
that tech stocks are doing well, and seeing demand and growth
world-wide," he said.
The video-streaming giant said it added 7.41 million subscribers
in the first quarter, including 5.46 million internationally.
Still, many analysts expect the wider first-quarter earnings
season to offer only a limited boost to the equity market, in light
of high expectations and continued uncertainty about trade and
tensions around Russia and Syria.
"The early take is things are good...but there's a lot of
nervousness going forward because the geopolitical scene is a
constantly changing one," said Mr. Kinahan.
Chinese technology shares fell sharply Thursday after the U.S.
and U.K. took warned against Chinese telecom-equipment heavyweight
ZTE and the U.S. Commerce Department banned companies from selling
products to ZTE, saying the company violated the terms of a deal
last year settling allegations of sanctions busting involving North
Korea and Iran.
ZTE is a maker of smartphones, and the prospects of the company
seeing reduced business hit stocks of Asian companies in the supply
chain.
Hong Kong's Hang Seng Index gave up earlier gains to fall 0.8%
in late trading while Taiwan's Taiex Index fell 1.3%. Taiwan
Semiconductor, the island's largest company, ended down 2.3%.
In Hong Kong, component makers Sunny Optical and AAC
Technologies fell 5.8% and 4.6%, respectively. ZTE, which is listed
in Hong Kong, didn't trade Tuesday, though Jefferies slashed its
stock target by more than half.
The Shanghai Composite Index closed down 1.4% while the
startup-heavy ChiNext Price Index in Shenzhen shed 3%.
The declines came despite a temporary boost for stocks after
China released better-than-expected economic growth figures to
start 2018.
China's gross domestic product increased 6.8% from a year
earlier in the first quarter, beating expectations slightly and
equaling 2017's growth. March retail sales also rose slightly more
than analysts expected, though industrial-production growth fell
short.
Elsewhere in Asia, Japan's Nikkei Stock Average edged up
0.1%.
In Europe, shares of Associated British Foods rose 4.3% after
the Primark owner released profit figures and left its outlook for
the full year unchanged.
The multinational-heavy FTSE 100 lagged slightly behind after
grappling with a strengthening British pound to start the week. A
stronger U.K. currency typically means corporate earnings generated
overseas are worth less translated back into pounds.
Sterling was last down 0.2% at $1.4319 after settling Monday at
its highest afternoon level against the dollar since the U.K.
referendum in June 2016.
While European shares have struggled with a stronger euro and
British pound this year, U.S. companies benefited in the first
quarter from a weaker dollar. Of the S&P 500 companies that
reported results through Monday, 60% discussed a positive impact
from foreign-exchanges rates, according to FactSet.
Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at
ese.erheriene@wsj.com
(END) Dow Jones Newswires
April 17, 2018 06:55 ET (10:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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