Stocks in Europe rose Thursday, following US shares higher as robust earnings helped overcome worries about persistent inflation.
Europe’s Stoxx 600 index climbed for a second day to the highest in more than a month. That tracked moves in Asia, where a gauge of the region’s stocks advanced 0.9% to the best level since early January. US equity futures pointed to further gains after the S&P 500 rose 1% Wednesday to retake the 5,000 mark. That retraced the bulk of losses spurred by data showing US core inflation for January rose more than expected, dashing hopes that a first Federal Reserve interest-rate cut is imminent.
It’s another busy day of earnings in Europe. Stellantis NV rose after the Jeep maker announced a share buyback and a higher dividend. Airbus SE slipped as its guidance disappointed. Pernod Ricard SA rallied 6.3% as it forecast improved second-half sales.
Gains for US stocks on Wednesday were supported by large tech companies. The NYSE Fang+ index that includes Nvidia Corp, Microsoft Corp. and Apple Inc. rose 2% — twice as much as the broader market. Favorable earnings reports also helped. Uber Technologies Inc. surged 15% after announcing $7 billion in share buybacks, while Robinhood Markets Inc. rose 14% as revenue topped estimates.
After this week’s hot US inflation report forced traders to curb their optimism over early Fed easing, there are more readings on the world’s largest economy to digest Thursday. Investors will study data due later including initial jobless claims, industrial production and retail sales for clues on the policy outlook.
Traders have further scaled back Fed cut bets, and have largely given up hope of a cut in March. The chance of one the following meeting in early May stands at 1-in-3, down from almost full certainty two weeks ago.
“The ‘hot’ inflation data do not change our base case for a soft landing,” said Solita Marcelli at UBS Global Wealth Management. “But we are continuing to monitor the incoming data and the start of rate cuts could be delayed should the economic prints remain strong.”
Federal Reserve Bank of Chicago President Austan Goolsbee said Wednesday that slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s 2% goal. Fed Vice Chair for Supervision Michael Barr, meanwhile, said US policymakers need to see more data showing inflation is heading back to target levels before they start cutting rates.
Treasury yields fell for a second day Thursday and a gauge of dollar strength edged lower. The pound dipped after data showed that the UK was in a technical recession in the second half of 2023 and UK bonds gained.
UK gross domestic product fell 0.3% in the fourth quarter, more than the 0.1% drop economists forecast, Office for National Statistics figures Thursday show. It followed an unrevised 0.1% decline in the previous three months.
In Asian trading, Taiwan Semiconductor Manufacturing Co. advanced 7.9% to a record high, adding about $42 billion of market value as investors bet the chipmaker to Nvidia Corp. and Apple Inc. will become one of the biggest winners in AI development.
Japan’s blue-chip equity index is at a three-year high relative to its broader counterpart as major exporters such as technology firms rally on strong earnings and a weak yen. The so-called NT ratio, which compares the Nikkei 225 Stock Average with the Topix, reached its highest since 2021. The Nikkei is within a few percentage points of its 1989 record.
“Asian markets are taking a cue from the US markets that continue to price very aggressively soft-landing outcome for the economy and positive earnings growth in 2024,” said Homin Lee, senior macro strategist at Lombard Odier.
A Japanese official said the country is at the last stage of beating deflation, ahead of the release of economic growth figures Thursday that showed a surprise slip into recession. The yen strengthened to trade at around 150 per dollar, after touching a three-month low this week.
Mainland Chinese markets remain closed for the Lunar New Year holiday. The Golden Dragon index of US-listed Chinese companies climbed 3.5% in New York trading, in a sign of upward pressure for those stocks.
Elsewhere, BHP Group Ltd. fell after it said it will have an impairment charge of $2.5 billion in its half-yearly results to be announced next week, relating to nickel assets.
In commodities, oil extended its declines after the US reported crude inventories rose to levels last seen in November.
Key Events This Week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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