Evergrande, Earnings Lift Stocks; Treasuries Gain: Markets Wrap

Evergrande, Earnings Lift Stocks; Treasuries Gain: Markets Wrap
Robert Brand
·3 min read

(Bloomberg) -- Stocks in Europe advanced on Friday after China Evergrande Group pulled back from the brink of a default, injecting a note of optimism into markets at the end of a week dominated by earnings reports and inflation worries.

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Consumer stocks led gains in the Stoxx Europe 600 index, with cosmetics maker L’Oreal SA jumping more than 6% after reporting a third-quarter earnings beat. On the downside, French carmaker Renault SA and London Stock Exchange Group Plc were the latest companies to report supply-chain challenges.

Futures on the S&P 500 were little changed, but Nasdaq 100 contracts retreated after Snap Inc. -- owner of the Snapchat app -- tumbled in after-hours trading on a tempered earnings outlook, hurting other technology shares. In Asia, rallies in China’s technology equities and property shares were among the more notable moves. Evergrande paid a bond coupon before this weekend’s deadline, easing concern that the property developer’s woes would ripple out to other markets.

The 10-year U.S. Treasury yield fell below 1.70% but remains higher for the week. The dollar edged lower, on track for a second week of declines. The Federal Reserve is nearing a reduction in bond purchases and traders are ramping up bets on rate hikes to quell price pressures. Market-implied expectations for inflation have hit multiyear highs.

Global stocks are set for a third weekly advance, helped by the ongoing global recovery from the health crisis. The rally is being shadowed by the prospect of a faster-than-expected tightening of monetary policy to curb inflation, which is being stoked by an energy crunch and creaking supply chains.

The supply squeeze caused the steepest decline in French manufacturing output since since last year’s coronavirus lockdowns, and severely damped growth momentum in Germany, purchasing managers reported Friday. The U.K.’s 10-year breakeven rate - a gauge of inflation expectations -- rose to a 25-year high.

“The U.S. economy is still on solid footing, but now inflation remains the biggest threat,” Edward Moya, senior market analyst at Oanda Corp., wrote in a note, adding investors are waiting for more earnings reports as well as the final shape of President Joe Biden’s economic agenda.

Snap’s outlook included a warning that global supply-chain issues are weighing on advertising spending. Shares in other tech firms exposed to digital advertising, like Facebook Inc. and Twitter Inc., weakened in late trading.

Elsewhere, crude oil was steady, and Bitcoin hovered around $63,000 after slipping back from its recent record.

For more market analysis, read our MLIV blog.

Events to watch this week:

  • Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.4% as of 9:33 a.m. London time

  • Futures on the S&P 500 were little changed

  • Futures on the Nasdaq 100 fell 0.4%

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index rose 0.2%

  • The MSCI Emerging Markets Index rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro rose 0.2% to $1.1643

  • The Japanese yen was little changed at 113.93 per dollar

  • The offshore yuan rose 0.2% to 6.3835 per dollar

  • The British pound was little changed at $1.3798

Bonds

  • The yield on 10-year Treasuries declined two basis points to 1.68%

  • Germany’s 10-year yield advanced one basis point to -0.09%

  • Britain’s 10-year yield declined one basis point to 1.19%

Commodities

  • Brent crude was little changed

  • Spot gold rose 0.5% to $1,792.50 an ounce

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