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European stocks positioned to follow Asia higher

Sydney - European  stocks were poised to follow Asia higher as investors awaited the US earnings season, a potential catalyst for further gains.

Index futures rose in Europe, as well as the US, and equities in mainland China recovered to follow gains in Sydney, Tokyo and Seoul, though volume in those three markets was below average.

An index of Chinese companies trading in Hong Kong climbed the most in nearly four months. The kiwi and yen were the weakest major currencies, while the rand, Turkish lira and Mexican peso also declined. Bonds softened, extending a slump triggered by more hawkish rhetoric from central banks.

With global equities remaining near all-time highs, scrutiny turns to corporate results. Pepsi, JPMorgan, Citigroup and Wells Fargo & Co are reporting this week. Tim Moe, chief Asia-Pacific strategist at Goldman Sachs (Asia), told Bloomberg TV that his company expects US earnings to be slightly above expectations. “We’re looking at about 9% annual earnings growth in the US,” he said.

Bob Doll, senior portfolio manager and chief equity strategist at Nuveen Asset Management, said improving corporate earnings are the key ingredient to sustain the equity bull market. “With economic growth prospects looking solid, we think earnings can climb,” he said.

Investors will hear from US policy maker Lael Brainard on Tuesday in a speech focused on normalisation of central bank balance sheets, and Federal Reserve Chair Janet Yellen’s semi-annual Monetary Policy Report to Congress is on Wednesday. The Bank of Canada announces its interest-rate decision tomorrow, with a hike expected by most analysts.

These are the main moves in markets:

Currencies and bonds

The yen was down 0.4% at ¥114.45/$ as of 07:13, declining for a third day. The Bloomberg Dollar Spot Index gained 0.1%. The pound was little changed and the euro lost 0.1%. The rand dropped 0.5% to 13.56 per dollar, while the Turkish lira fell 0.3% and the Mexican peso was down 0.1%.

The kiwi slid 0.6% to 72.31 US cents. The yield on 10-year Treasuries rose one basis point to 2.39%. The yield on Australian government notes with a similar maturity was also up one basis point at 2.75%.

Stocks

Euro Stoxx 50 futures rose 0.3%. The underlying gauge rose 0.4% on Monday. S&P 500 futures were up 0.1% and FTSE 100 futures rose 0.2 percent. Japan’s Topix Index jumped 0.7%.

Hong Kong’s Hang Seng Index climbed 1.6%, heading for its first back-to-back gain in three weeks. The Hang Seng China Enterprises Index rose 2.3%, its biggest advance since March 16. The Shanghai Composite Index recovered from earlier losses and was up 0.3%.

Commodities

WTI crude strengthened 0.7% to $44.74 a barrel amid talks of production caps for Libya and Nigeria. Gold was down 0.2% at $1 211.99 an ounce. Silver slid 0.5% to $15.56 an ounce, approaching a 15-month low.

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