European Stocks Gain on Earnings, US Futures Flat: Markets Wrap

(Bloomberg) — European stocks rose for a second day, tracking gains in Asian markets on optimism that big technology companies will deliver robust earnings this week.

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The Stoxx Europe 600 index climbed 0.6%, with the technology sector leading the advance. SAP SE jumped almost 5% as a boom in demand for artificial intelligence fueled the German software company’s growth. Drugmaker Novartis AG climbed 4% after lifting full-year guidance.

US stock futures were little changed after Wall Street’s rebound on Monday. In Asia, technology firms drove Hong Kong gauges higher. Japanese shares held their advance even as the yen briefly strengthened against the dollar after Finance Minister Shunichi Suzuki’s warnings against excessive currency moves.

Earnings are front and center of investor’s minds this week with about 180 companies — representing over 40% of the S&P 500 market value — reporting results. The focus on corporate earnings comes after a rout fueled by geopolitical fears and signals the Federal Reserve will be in no rush to lower rates.

Treasuries were steady before a flurry of bond auctions that will test investors’ appetite after yields hit the highest in 2024. The dollar was little changed versus major peers.

The UK 10-year yield ticked higher after the government raised the amount of bonds it plans to sell this fiscal year by more than analysts expected, adding to what was already the second-largest gilt package on record.

Gold extended losses after its biggest daily decline in almost two years, with easing tension in the Middle East and signs the Federal Reserve will keep rates higher for longer crimping demand. Oil nudged higher as traders weighed the next steps between Israel and Iran amid signs of easing hostilities following a tit-for-tat exchange of attacks last week.

Elevated Multiples

The challenge to S&P 500 returns this earnings season is that companies will have to produce earnings — and outlooks — that support the already elevated multiples. Indeed, stakes are high for the “Magnificent Seven” megacaps, whose profits are forecast to rise 38% in the first quarter from a year ago, dwarfing the overall S&P 500’s 2.4% anticipated year-over-year earnings growth, according to Bloomberg Intelligence.

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But excluding Nvidia, the leading chipmaker for AI technology, expected net income growth for the group falls to 23%. Nvidia, which Goldman Sachs Group Inc.’s trading desk dubbed “the most important stock on planet Earth,” doesn’t report its earnings for another month.

Investor positioning on mega cap growth and tech stocks continues to be cut, down from the 97th percentile in early March to the 77th percentile now, according to Deutsche Bank AG strategists. The group is still the only sector where positioning is above historical average, even if no longer extreme, the strategists wrote.

Key events this week:

• US new home sales, Tuesday

• Tesla, PepsiCo earnings, Tuesday

• BOE chief economist Huw Pill speaks, Tuesday

• Germany IFO business climate, Wednesday

• US durable goods, Wednesday

• IBM, Boeing, Meta Platforms earnings, Wednesday

• US GDP, wholesale inventories, initial jobless claims, Thursday

• Microsoft, Alphabet, Airbus earnings, Thursday

• Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday

• 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 8:17 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures were little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.6%

• The MSCI Emerging Markets Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.0655

• The Japanese yen was little changed at 154.79 per dollar

• The offshore yuan was little changed at 7.2569 per dollar

• The British pound was little changed at $1.2342

Cryptocurrencies

• Bitcoin fell 0.2% to $66,374.24

• Ether fell 0.5% to $3,175.7

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.62%

• Germany’s 10-year yield was little changed at 2.49%

• Britain’s 10-year yield advanced two basis points to 4.22%

Commodities

• Brent crude rose 0.2% to $87.15 a barrel

• Spot gold fell 0.9% to $2,306.40 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jessica Menton and Chiranjivi Chakraborty.

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