Saturday, July 20, 2024

Stocks eye weekly rise on earnings boost but rate hikes loom

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SINGAPORE: Asian equities rose on Friday and were set for a weekly gain as strong earnings at Amazon.com boosted U.S. futures, while selling in bonds spread to Japan from other markets as investors reacted to hawkish signals from central banks in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1%, led by a 3% surge for the Hang Seng index in its first day of trading after this week’s Lunar New Year holidays. Japan’s Nikkei closed up 0.7%.

After heavy selling on Thursday, when Facebook owner Meta Platforms dropped 26%, Wall Street futures rebounded courtesy of an earnings beat that lifted Amazon shares about 14% in after-market trade.

S&P 500 futures were last up 1% and Nasdaq 100 futures rose more than 2%.

“We’re starting to see is a little bit more two-way action in terms of profits,” said David Cassidy, head of investment strategy at Wilsons Advisory in Sydney.

“That’s leading to volatility when you’ve got both macro pressure … from stimulus withdrawal and also some hiccups on the earnings front.” Shares of Snap and Pinterest rose in extended trading, too, following strong quarterly reports, and Twitter also jumped, reversing some earlier losses.

European futures were up 0.25%, German DAX futures 0.33%, and FTSE futures 0.58%.

Currency markets were calm after a bumpy Thursday when both the Bank of England (BoE) and European Central Bank (ECB) sounded hawkish.

Selling in government bonds spread from Europe and the United States to Japan on Friday, lifting five-year Japanese yields above zero for the first time since 2016.

Yields rise when bond prices fall.

Oil added to inflationary pressures, as U.S. crude touched a seven-year high of $90.99 a barrel and was set for a seventh weekly rise in a row.

INFLATION FIGHTING

U.S. jobs data will be released later in the global day. Economists polled by Reuters forecasts a small increase in jobs, though disruption to hiring caused by the latest wave of Omicron variant COVID-19 infections could result in a drop.

A weak number could even support stocks if it seemed bad enough to delay policy tightening, though many analysts think the wheels are already turning for higher rates globally.

ECB President Christine Lagarde on Thursday left the door open to rate hikes this year and the Bank of England on Thursday raised rates and nearly half its policymakers wanted a bigger increase.

“We’re seeing the environment is really changing in terms of central bank stances, which were previously so camped in growth-supportive territory, but now are shifting rapidly to fighting inflation,” said Rob Carnell, chief economist at ING in Singapore.

Treasuries were steady in the Asia session, with benchmark 10-year yields at 1.8364%. The euro made a small addition to Thursday’s surge and rose about 0.2% to a three-week high of $1.1472.

A cautious mood has kept a lid on trade-linked currencies, however, and the Australian dollar was a fraction weaker at $0.7127 and the kiwi held at $0.6665.

Gold was steady at $1,806 an ounce. – Reuters




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