Tech rally fuels equities rally, commodities gain

European stocks gained along with US equity futures following blockbuster earnings from Microsoft Corp. and Alphabet Inc. The yen weakened to a 34-year low before paring losses in a sharp move, with traders on guard for any hints of intervention from Japan.

The Stoxx Europe 600 climbed 0.6%, heading for its first weekly advance in four, with the technology sector leading gains. Miners rose as copper hit $10,000 a ton for the first time in two years, though Anglo American Plc underperformed after rejecting BHP Group’s $39 billion takeover proposal. Chemicals were the only sector in the red after disappointing earnings from IMCD NV.

Thyssenkrupp AG jumped more than 10% after Czech billionaire Daniel Kretinsky’s EP Corporate Group agreed to take a 20% stake in the German company’s troubled steel unit. Amundi SA rose after reporting net inflows for the first quarter that beat the average analyst estimate. NatWest Group Plc advanced after an earnings beat.

Contracts for the S&P 500 and Nasdaq 100 signaled the underlying gauges are set to rebound from Thursday’s losses. That’s after Alphabet crushed sales estimates and announced a dividend. Fellow megacap Microsoft also beat forecasts, lifted by corporate demand for the software maker’s cloud and artificial-intelligence offerings.

Almost 80% of S&P 500 firms that have reported so far have beaten analysts’ earnings estimates, according to JPMorgan Chase & Co. strategists. Still, stock price reactions have been underwhelming, with better-than-expected results seeing below average upside, while those missing estimates are being penalized by more than usual, the strategists wrote.

“We expect upside surprises to prevail, given the positive macro backdrop in the first quarter and moderate expectations,” said Wolf von Rotberg, an equity strategist at Bank J. Safra Sarasin.  “Yet, the impact on performance is ambiguous, given that valuations are already priced for a solid upward sloping trajectory in earnings. The recent rise in rates puts a question mark on current PE levels, making the market more vulnerable to disappointments in the short term.”

While earnings remain center stage, the focus Friday will also be on US data, with the Federal Reserve’s preferred measure of inflation of particular interest. Treasury yields dipped following yesterday’s losses when economic data pushed back expectations for policy easing. A gauge of the dollar was steady.

The strong earnings news from the US supported gains on Friday for some of Asia’s tech titans, including Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Tencent Holdings Ltd. Equity benchmarks in Japan, South Korea, Taiwan and China all advanced. 

The yen extended its relentless decline after BOJ Governor Kazuo Ueda said the currency’s slump isn’t having a big impact on underlying prices yet, suggesting the central bank will stick with its slow and gradual approach to contain inflation. The extended decline has heightened speculation that authorities may intervene in the market, especially if US data later Friday feeds into the higher-for-longer narrative for the Federal Reserve.

“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “It is not the level but it’s the speed that will trigger the action.”

US core PCE price index data published Thursday advanced at a faster-than-expected 3.7% clip. The print combined with a US gross domestic product data that trailed all forecasts to rekindle the specter of stagflation. The Fed’s preferred inflation measure, the core PCE deflator, is due later Friday.

Elsewhere, gold edged higher Friday even as the precious metal headed for a weekly loss. West Texas Intermediate rose to the highest level in more than a week, on pace for a weekly advance.

Key events this week:

• US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
• Exxon Mobil, Chevron earnings, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.6% as of 9:13 a.m. London time
• S&P 500 futures rose 0.8%
• Nasdaq 100 futures rose 1.1%
• Futures on the Dow Jones Industrial Average rose 0.2%
• The MSCI Asia Pacific Index rose 0.7%
• The MSCI Emerging Markets Index rose 1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0740
• The Japanese yen fell 0.4% to 156.21 per dollar
• The offshore yuan was little changed at 7.2574 per dollar
• The British pound was little changed at $1.2520

Cryptocurrencies

• Bitcoin fell 0.6% to $64,379.51
• Ether fell 1% to $3,142.93

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.67%
• Germany’s 10-year yield declined three basis points to 2.60%
• Britain’s 10-year yield declined three basis points to 4.33%

Commodities

• Brent crude rose 0.5% to $89.44 a barrel
• Spot gold rose 0.6% to $2,346.94 an ounce

This story was produced with the assistance of Bloomberg Automation.

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