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Stocks higher, bonds bounce with earnings awaited

Jul 10 2017 15:27
Bloomberg: Natasha Doff

Moscow - Bonds followed stocks higher as investors prepare to parse second-quarter earnings for more evidence global economic growth is back on track. Oil traded near the lowest closing price in two weeks.

Technology and food companies led European equities higher, following a similar advance across much of Asia and in US futures. The dollar edged higher against most major currencies and bonds recovered after a selloff last week.

Oil slumped after an Opec minister said Libya and Nigeria may be requested to cap their production. Gold and silver also fell.

With global stocks close to all-time highs, investors are shrugging off political uncertainty and placing their faith in a continued earnings expansion on broadening global growth.

Germany’s trade surplus was higher than estimated as May exports beat forecasts, while US employers added the most jobs in four months in June. PepsiCo, JPMorgan Chase, Citigroup and Wells Fargo & Co are set to report results this week.

"Solid employment growth without inflation is the 'not too hot, not too warm' mix that keeps the Fed normalising policy ever so slowly, equity indices marching ever higher and the economic cycle able to trundle on with no recession in sight," Kit Juckes, a strategist at Societe Generale, wrote in a note to clients.

The G-20 summit made little headway on dominant foreign policy issues such as North Korea’s escalation of tensions. Meetings between US President Donald Trump and the leaders of South Korea, Japan and China ended without a clear consensus about how to curb North Korea’s nuclear ambitions.

Here’s what investors will be watching:

Federal Reserve Chair Janet Yellen’s testimony before Congress will be in focus later this week as investors look for guidance on when the US central bank could start reducing its balance sheet.

The UK government is due to publish it’s Repeal Bill on membership of the European Union this week.

European Central Bank President Mario Draghi, executive board member Benoit Coeure and Single Supervisory Mechanism Chair Daniele Nouy will participate in a Eurogroup meeting in Brussels.

These are the main moves in markets:

Stocks

The Euro Stoxx 50 index was 0.2% higher as of 8:33 in New York.  S&P 500 Index futures were up less than 0.1%.

Currencies

The Bloomberg Dollar Spot Index added 0.1%.  The pound retreated 0.1% to $1.2880 and the euro dropped by a similar amount to $1.1385.

Bonds

The yield on 10-year Treasuries dropped 1 basis point to 2.38% after rising 23 basis points in the past two weeks. In Europe, peripheral nations led a rally with benchmark bonds yields in Italy and Spain shedding six basis points.

The yield on 10-year bunds fell three basis points to 0.54%.  

Commodities

WTI crude dropped 0.7% to $43.92 a barrel following its 2.8% slide on Friday.  Gold dropped 0.2% to $1 210.38 an ounce after touching its lowest level since March. Silver fell 1.9%.

Asia

The yen fell 0.3% to its weakest since May 11 as Bank of Japan Governor Haruhiko Kuroda reiterated that policy could be adjusted as needed. The MSCI Asia Pacific Index rose 0.3% after hitting a five-week low on Friday.

Japan’s Topix Index added 0.5%.  

Australia’s S&P/ASX 200 Index gained 0.4%. Hong Kong’s Hang Seng Index rose 0.7%, while shares on the mainland declined.

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