Stocks Gain as Earnings Offset Fresh China Worries: Markets Wrap

Stocks Gain as Earnings Offset Fresh China Worries: Markets Wrap
Robert Brand
·3 min read

(Bloomberg) -- Stocks in Europe extended a record advance on Tuesday as positive earnings from some of the region’s biggest companies helped offset fresh concerns about China’s clampdown on the gaming and technology sector.

Energy shares led a modest gain in the Stoxx Europe 600 index after BP Plc followed its Big Oil peers by increasing dividends and share buyback, while banks outperformed after Societe Generale SA’s improved outlook and a return to profit by Bank of Ireland Group Plc.

Tech stocks were among the biggest losers, with Prosus NV plunging as much as 5.7% after Chinese Internet giant Tencent Holdings Ltd. -- in which it holds a stake -- slumped on fears the authorities will set their sights on online entertainment next. A new Chinese pricing probe weighed on chipmakers, with Infineon Technologies AG’s profit miss adding to worries. Evolution AB, a maker of online casino games, led declines in the travel and leisure gauge.

S&P 500 contracts edged higher and those on the Nasdaq 100 were little changed after the spread of the delta Covid-19 variant and signs of robust but softer U.S. manufacturing growth contributed to an S&P 500 dip on Monday. The 10-year U.S. Treasury yield edged higher after falling as low as 1.15%. The dollar slipped against major peers.

The months-long advance in Treasuries for some commentators points to worries that a weaker period lies ahead for the economic reopening from the health crisis, though second-quarter corporate earnings have been robust for the most part. Traders are awaiting key U.S. jobs data this week to gauge the recovery and monitoring the impact of price pressures sparked by pandemic-related disruption and bottlenecks.

“I don’t think the market is concerned about delta as much as it’s concerned about how it impacts inflation,” Shana Sissel, Spotlight Asset Group chief investment officer, said on Bloomberg Television, referring to the coronavirus variant. “The longer we have delta spread globally, the longer the supply chain disruptions will continue.”

On the policy front, the tapering debate continues. Federal Reserve Governor Christopher Waller said he could back a tapering 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 though the spread of the delta coronavirus variant, including in the key market of China, continues to pose a risk to demand. New Zealand’s dollar jumped on policy tightening bets. Australia’s currency advanced after its central bank kept a plan to taper bond purchases despite a protracted lockdown in Sydney.

Here are some key events to watch this week:

Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged ThursdayReserve Bank of India monetary policy decision, briefing FridayThe U.S. jobs report is expected to show another robust month of hiring Friday

For more market analysis read our MLIV blog.

Stocks

The Stoxx Europe 600 rose 0.2% as of 10:21 a.m. London timeFutures on the S&P 500 gained 0.3%Futures on the Nasdaq 100 were little changedFutures on the Dow Jones Industrial Average rose 0.4%The MSCI Asia Pacific Index was little changedThe MSCI Emerging Markets Index rose 0.2%

Currencies

The Bloomberg Dollar Spot Index fell 0.1%The euro rose 0.1% to $1.1883The Japanese yen rose 0.1% to 109.17 per dollarThe offshore yuan was little changed at 6.4638 per dollarThe British pound rose 0.2% to $1.3911

Bonds

The yield on 10-year Treasuries advanced two basis points to 1.20%Germany’s 10-year yield advanced two basis points to -0.47%Britain’s 10-year yield advanced two basis points to 0.54%

Commodities

Brent crude rose 0.7% to $73.42 a barrelSpot gold fell 0.2% to $1,809.06 an ounce

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