Stocks gain as profits offset new concerns from China
Shares in Europe posted record gains on Tuesday as positive earnings from some of the region’s largest companies helped offset new concerns over China’s crackdown on the games and tech sector.
Energy stocks led a modest gain in the Stoxx Europe 600 index after BP Plc followed its Big Oil peers by increasing dividends and share buybacks, while banks outperformed after improvement prospects for Societe Generale SA and a return to profits for Bank of Ireland Group Plc.
Tech stocks were among the biggest losers, with Prosus NV dipping as much as 5.7% after Chinese internet giant Tencent Holdings Ltd. – in which it owns a stake – collapsed over fears that authorities would then turn to online entertainment. A new Chinese price survey has weighed on chipmakers, with Infineon Technologies AG’s shortfall adding to concerns. Evolution AB, an online casino game maker, has driven drops in the travel and leisure gauge.
S&P 500 contracts edged up and those of the Nasdaq 100 changed little after the spread of the COVID-19 delta variant and signs of robust but weaker US manufacturing growth contributed to a decline in the S&P 500 on Monday. The 10-year US Treasury yield edged up after falling as low as 1.15 percent. The dollar slipped against its major peers.
The several-month advance of Treasuries for some commentators raises fears that a weaker period is looming for economic reopening after the health crisis, although second-quarter corporate profits were mostly robust. Traders are awaiting key US employment data this week to assess the recovery and monitor the impact of price pressures triggered by the pandemic disruptions and bottlenecks.
“I don’t think the market cares as much about the delta as it does about its impact on inflation,” Shana Sissel, chief investment officer of Spotlight Asset Group, told Bloomberg Television, referring to the coronavirus variant. “The more delta spread we have globally, the more supply chain disruptions will continue.”
Politically, the reduction debate continues. Federal Reserve Governor Christopher Waller has said he could back a phased-down announcement by September, if the next two monthly U.S. employment reports show continued gains.
Crude oil reversed earlier losses as sentiment improved in broader markets, even as the spread of the delta coronavirus variant, including in China’s key market, continues to pose a risk to demand . The New Zealand dollar surged on policy tightening bets. The Australian currency rose after its central bank maintained a plan to cut bond purchases despite a prolonged foreclosure in Sydney.
Here are some key events to watch out for this week:
- Bank of England is expected to keep benchmark interest rate and bond buying target unchanged on Thursday
- Reserve Bank of India monetary policy decision, briefing Friday
- U.S. jobs report expected to show another robust hiring month on Friday
- The Stoxx Europe 600 rose 0.2% at 10:21 a.m. London time
- S&P 500 futures gained 0.3%
- Nasdaq 100 futures have not changed much
- Futures contracts on the Dow Jones Industrial Average rose 0.4%
- Little changed in the MSCI Asia-Pacific index
- MSCI Emerging Markets index rose 0.2%
- Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1 percent to US $ 1.1883
- The Japanese yen rose 0.1% to 109.17 per dollar
- The offshore yuan was little changed at 6.4638 per dollar
- The British pound rose 0.2% to US $ 1.3911
- The yield on 10-year treasury bills rose two basis points to 1.20%
- German 10-year rate rose two basis points to -0.47%
- UK 10-year yield rose two basis points to 0.54%
- Brent crude rose 0.7% to US $ 73.42 a barrel
- Spot gold fell 0.2% to US $ 1,809.06 an ounce