Stocks rise as US strength, earnings lift optimism: markets wrap

by Andre Janse van Vuuren

Global equities extended their advance on Friday as growing confidence in the resilience of the US economy and upbeat earnings lent fresh support to risk sentiment.

Europe’s stock benchmark rose 0.4%. S&P 500 and Nasdaq 100 futures nudged 0.1% higher after both indexes set closing highs on Thursday. The combined value of cryptoassets soared beyond $4 trillion for the first time, fueled by a surge in altcoins and momentum from a legislative push to regulate the sector.

The dollar slipped 0.2% as Federal Reserve Governor Christopher Waller backed a July interest-rate cut to support a softening labor market. The message failed to catch on in money markets, with swaps pricing less than a 60% chance of a quarter-point cut in September and assign no probability to easing this month. 

Treasuries advanced, with the 10-year yield down one basis point to 4.44%.

The cross-asset moves come at the end of a week marked by market jitters over speculation that President Donald Trump might fire Fed Chair Jerome Powell. Equity gains reflected strong economic data and optimism that US companies will post robust second-quarter figures, helping to soothe uncertainty stirred by Trump’s tariff war.

Early results show S&P 500 earnings are on track to rise 3.2% for the second quarter, slightly ahead of pre-season expectations of 2.8%, according to data compiled by Bloomberg Intelligence.

“All that helps to reinforce the bull case for equities, with this solid underlying economic momentum likely to see earnings growth remain healthy,” said Michael Brown, senior research strategist at Pepperstone.

American Express Co. and 3M Co. are due to report on Friday, offering investors new insight into the health of US consumers. On Thursday, Netflix Inc.’s results surpassed expectations across all key metrics. The company also raised its full-year outlook for both revenue and profit margins.

Bank of America Corp. strategists warn that a bubble may be forming in US equities, with the clearest sign being if stocks continue to rally despite rising inflation expectations and bond yields hitting new highs.

For Mohit Kumar, chief European strategist at Jefferies International, risk assets are likely to remain well supported until next month, when US employment data may start to show some weakness.

“We remain positive on risky assets over the coming weeks, though we have taken some chips off the table,” Kumar noted. “Technicals will start to  shift in August.”

Corporate Highlights:

• Netflix Inc. reported second-quarter results that exceeded investor expectations in every major metric. The company also raised its forecast for full-year sales and profit margins.
• Sarepta Therapeutics Inc. said another patient has died from acute liver failure after receiving one of its gene terapies. Shares fell as much as 18% in premarket trading.
• GSK Plc shares tumbled after its blood cancer drug failed to secure the backing of a panel of US regulatory advisers, putting its approval in doubt.
• Reckitt Benckiser Group Plc agreed to sell most of its homecare business to private equity firm Advent International for an enterprise value of up to $4.8 billion.
• Burberry’s sales fell less than expected, as the UK fashion brand begins to deliver on its turnaround plan under Chief Executive Officer Joshua Schulman.
• Taiwan Semiconductor Manufacturing Co. sees currency volatility as a “big uncertainty” to its margins and will constantly review hedging strategies to manage the impact, said Chief Financial Officer Wendell Huang.
• Stocks of battery material makers climbed after the US announced it would impose preliminary anti-dumping duties of 93.5% on graphite imports from China.

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.4% as of 10:52 a.m. London time
• S&P 500 futures rose 0.1%
• Nasdaq 100 futures rose 0.1%
• Futures on the Dow Jones Industrial Average rose 0.1%
• The MSCI Asia Pacific Index rose 0.5%
• The MSCI Emerging Markets Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.1634
• The Japanese yen was little changed at 148.71 per dollar
• The offshore yuan was little changed at 7.1820 per dollar
• The British pound rose 0.2% to $1.3438

Cryptocurrencies

• Bitcoin fell 0.4% to $118,999.08
• Ether rose 5.8% to $3,621.66

Bonds

• The yield on 10-year Treasuries was little changed at 4.44%
• Germany’s 10-year yield advanced two basis points to 2.70%
• Britain’s 10-year yield advanced two basis points to 4.67%

Commodities

• Brent crude rose 1.2% to $70.37 a barrel
• Spot gold rose 0.4% to $3,353.13 an ounce

This story was produced with the assistance of Bloomberg Automation.

Copyright Bloomberg News