Tech firms dominate investments to lead stock rally

Stocks gained as an onslaught of positive earnings from technology companies reinforced the picture of a broadly robust corporate sector.   

Netflix Inc. rallied 10% in premarket trading after subscriber numbers surpassed expectations. Futures on the Nasdaq 100 rose about 0.7%. Tech is dominating the investment picture in the US, where Tesla Inc. and International Business Machines Corp. are due to report later in the day. 

The Stoxx 600 index climbed 0.8%, propelled by a rally in ASML Holding NV, Europe’s most valuable technology company, after orders more than tripled. SAP SE rose as it unveiled a restructuring plan to boost profits and increase its focus on artificial intelligence. 

“We’re in somewhat of a sweet spot at the moment for equities,” said Francois Rimeu, a strategist at La Francaise Asset Management in Paris. “US economic newsflow is good, growth is flat in Europe, but it’s no drama and nobody believes in the resurgence of inflationary pressures.” 

He added, “earnings in US tech and artificial intelligence are also holding up, which itself is backing the broader market.” 

Meanwhile, a sentiment boost came from China’s plan to stimulate its economy by cutting the reserve requirement ratio for banks. The move should allow Chinese banks to step up lending and their purchases of government bonds. European commodities shares rallied and the Hang Seng Index added 3.6%. 

In currency markets, the yen rose more than 0.5% against the dollar as investors decided that monetary policymakers are on track to scrap negative interest rates in the near term after all. Swaps markets have ramped up their bets on a 25 basis-point rate hike in April, following the Bank of Japan’s Tuesday meeting.  

The spotlight turns now to other monetary policy meetings, including at the Bank of Canada later in the day and the European Central Bank on Thursday. Both are expected to keep policy rates on hold, but could signal an approximate timing for the first rate cut.

Euro-area bond yields slipped after data showed business activity contracted in January for the eighth month. While expectations of a March ECB rate cut have faded, traders added to the extent of monetary easing they expect this year, with 136 basis points priced by year end. 

The pound strengthened after UK data revived worries about inflation, with private sector firms reporting the sharpest jump in costs in five months. 

A gauge of the dollar retreated after two days of gains. Ten-year Treasury yields dipped 3 basis points to 4.1%. 

Meanwhile, former President Donald Trump won the New Hampshire primary, solidifying his status as the Republican party’s likely nominee. A Trump presidency raises the prospect of higher trade tariffs, according to Goldman Sachs Group Inc. German industrials, chemicals and autos are some of the companies most vulnerable in that scenario, strategists at the bank wrote. 

Corporate Highlights

• Infineon and STMicro shares fell after Texas Instruments delivered a disappointing quarterly forecast, signaling a persistent slump in demand for industrial and automotive electronic components.
• Siemens Energy AG shares rose after the German renewable delivered a beat across the board in the first quarter. 
• Puma SE shares dropped after the sportswear brand reported preliminary fourth-quarter sales that missed analyst estimates.

Key events this week:

• Canada rate decision, Wednesday
• Eurozone S&P Global Services & Manufacturing PMI, Wednesday
• US S&P Global Services & Manufacturing PMI, Wednesday
• Eurozone ECB rate decision, Thursday
• Germany IFO business climate, Thursday
• US GDP, initial jobless claims, durable goods, wholesale inventories, new home sales, Thursday
• Japan Tokyo CPI, Friday
• US personal income & spending, Friday
• Bank of Japan issues minutes of policy meeting, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.8% as of 9:26 a.m. London time
• S&P 500 futures rose 0.4%
• Nasdaq 100 futures rose 0.8%
• Futures on the Dow Jones Industrial Average rose 0.1%
• The MSCI Asia Pacific Index rose 0.8%
• The MSCI Emerging Markets Index rose 1.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.3% to $1.0889
• The Japanese yen rose 0.6% to 147.49 per dollar
• The offshore yuan was little changed at 7.1643 per dollar
• The British pound rose 0.3% to $1.2728

Cryptocurrencies

• Bitcoin rose 2% to $39,995.62
• Ether rose 1.7% to $2,240.07

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.10%
• Germany’s 10-year yield declined four basis points to 2.31%
• Britain’s 10-year yield declined three basis points to 3.96%

Commodities

• Brent crude rose 0.7% to $80.08 a barrel
• Spot gold rose 0.2% to $2,032.97 an ounce

This story was produced with the assistance of Bloomberg Automation.