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Edinburgh - Positive earnings set the tone for equity markets while the dollar traded at a seven-week high as speculation grew the US will raise interest rates this year.
Technology companies and car makers led the Stoxx Europe 600 Index higher after earnings from software maker SAP SE and Volkswagen beat analysts’ estimates. US stock futures signalled shares will approach all-time highs, the dollar advanced for a second day against the euro while Treasuries declined.
The lira fluctuated near a record-low as the country’s president vowed to make an "important"announcement in the wake of a failed coup attempt. Gold headed for the lowest close this month.
Corporate earnings are helping sustain a run that’s added more than $4.5trn to the value of equities worldwide in three weeks. That along with better-than-estimated US economic data is providing comfort to investors even as concern mounts that the UK’s vote to leave the European Union will damp global growth.
Microsoft and Morgan Stanley were among the latest US companies to report earnings that surpassed forecasts.
"Microsoft has for a long time has been one of the bellwether stocks for the US," said Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments. 'I am seeing more greens than reds in terms of earnings beats, which seems relatively positive.
Stocks
The Stoxx 600 added 0.7% at 7:15 a.m. in New York, with the volume of shares changing hands 38% lower than the 30-day average. S&P 500 Index futures rose 0.3% after the measure slipped on Tuesday from an all-time high.
Europe’s benchmark gauge has alternated between gains and losses each day since last week, after a rebound of about 9% following the slump after the Brexit vote on June 23.
Investors watching corporate earnings results are also waiting for Thursday’s ECB meeting for clues about President Mario Draghi’s plans. Economists in a Bloomberg survey predict rates will remain unchanged this week.
SAP climbed 4.2% and VW surged as much as 6.3%. Alonzo Group jumped 6.4% as the Swiss developer of drug ingredients raised its annual guidance. Nordea Bank added 2% as its net fee and commission income topped predictions.
Anglo American dragged miners lower, falling 6.5%, after cutting its copper production target. Man Group lost 4.3% as its chief executive officer Emmanuel Roman was tapped to be CEO at Pacific Investment Management Company.
In the US, Microsoft climbed 4% in early New York trading and Morgan Stanley gained 2.9%. The earnings seasons so far has delivered more positive surprises than negative ones.
Analysts see profit at S&P 500 companies falling 5.8% in the second quarter, which would mark a fifth consecutive slide, the longest streak since 2009.
Currencies
The lira slipped 0.1% stronger at 3.0463 per dollar, after earlier sinking as much as 0.7% to 3.0623, within 0.5% of the all-time low reached in September.
The currency is down 4.9%, the worst performance among major currencies, since a failed coup attempt on Friday as authorities purged state institutions, the central bank lowered interest rates and Moody’s Investors Service said it may lower the country’s credit rating to junk.
President Recep Tayyip Erdogan is due to make an announcement on Wednesday that an official said would boost social cohesion and Turkey’s democratic credentials.
The Bloomberg Dollar Spot Index climbed as much as 0.2% to its strongest level since June 1, before being little changed.
It advanced 0.5% on Tuesday as a report showed new-home construction in the US rose more than economists forecast in June.
A Citigroup gauge that tracks the degree to which American data are exceeding projections is at an 18-month high and futures put the chance of a Federal Reserve rate increase this year at 43%, up from 9% at the end of June.
"The market will recalibrate on Fed rate-hike expectations to price in at least one" this year, said Charlie Lay, a foreign-exchange strategist in Singapore at Commerzbank. "That should support the dollar."
Sterling climbed 0.4% to $1.3158 as the UK jobless rate, as measured by International Labour Organisation standards, dropped to 4.9% in the three months through May. The median forecast in a Bloomberg survey of economists was for an unchanged reading of 5%.
The yuan jumped as much as 0.28% to 6.6780 per dollar amid speculation China’s central bank is trying to prevent the currency from weakening beyond 6.70, a threshold that was breached this week for the first time since 2010.
The People’s Bank of China raised its daily reference rate for its currency on Wednesday, even after the greenback strengthened overnight.
Commodities
Raw material prices fell, with the Bloomberg Commodity Index slipping as much as 0.2% as industrial metals and gold declined on a stronger dollar. A stronger dollar affects consumption as it reduces demand from other countries.
Oil held near $45 a barrel as US industry data showed a drop in crude stockpiles, paring a surplus in the world’s largest fuel consumer. Futures were little changed in New York after dropping 1.3% on Tuesday to a two-month low.
Copper retreated 0.5% to $4,960 a ton in London after Chinese data showed output rising in the world’s biggest producer and user of refined metal, underscoring concerns that supply continues to outpace demand. Nickel dropped as much as 2.1%, retreating from its highest close since October.
Gold dropped 0.4%, heading for the lowest close this month at $1 326.10 an ounce as European equities rose on earnings, limiting demand for a haven and as rising expectations of a US interest rate increase reduced the appeal of non-yielding assets.
Bonds
Treasuries declined, with the 10-year yield rising two basis points to 1.58%. The yield has risen from an all-time low of 1.318%, set earlier this month, as data showed signs of resilience and boosted higher-yielding assets.
German 10-year bonds were little changed, snapping a two-day gain, after an auction of five-year notes. The bund yield was at minus 0.025%, up from a record-low minus 0.205% on July 6.
Spanish bonds rose, with the 10-year yield falling three basis points to 1.16%.
