Checkout
Cart: $0.00 - (0 items )

European stocks firm despite Wall Street pause

Tuesday 15:30 BST

What you need to know
● Euro Stoxx 600 up 0.6 per cent, S&P 500 flat
● CBOE Vix near 10-year low ahead of Apple results
● Euro and Bund yields flat as French election looms
● Dollar index inches up as traders await Fed and jobs data
● Oil and gold prices edge lower
——————-

Hot topic

Apple will report its results after Tuesday’s closing bell in New York and investors will be keen to see if the iPhone maker can help propel Wall Street to fresh highs.

The S&P 500 is down less than a point at 2,387 as trading gets under way in the new session, leaving the US equity benchmark just 9 points shy of its record close touched at the start of March.

Investor sentiment is being buoyed by a generally well-received first-quarter corporate earnings season and hopes that structural growth for many big technology companies — such as Facebook, Google, Amazon — can continue to power aggregate profits. The tech-heavy Nasdaq Composite closed on Monday in virgin territory having gained 13.2 per cent already in 2017 but is down 0.1 per cent in early trade on Tuesday.

And this investor bullishness is also reflected in the derivatives markets, where investors apparently see less need to buy protection for their portfolios.

The CBOE Vix, an option-based index that measures implied S&P 500 volatility, and which is known as Wall Street’s fear gauge, closed on Monday at 10.11, its lowest since February 2007. The Vix is nudging up to 10.20 on Tuesday.

Equities

Many European bourses are returning from a long weekend in an upbeat mood following Wall Street’s latest gains.

The Stoxx 600 is up 0.6 per cent as banks, insurers and the energy sector, helped by BP’s results, find favour.

Asia was more mixed. Japan’s Topix rose 0.7 per cent as exporters were helped by a weakening yen, while Australia’s S&P/ASX 200 was down 0.1 per cent owing to a bad day for the banks after ANZ Banking Group reported a half-year profit that missed analysts’ expectations.

South Korea’s Kospi shrugged off tensions with the North and was eyeing a record high with a gain of as much as 1.1 per cent to 2,229.7 in morning trade, before paring its advance to 0.7 per cent.

After returning from a long weekend, Hong Kong’s Hang Seng added 0.3 per cent and China’s Shanghai Composite lost 0.35 per cent amid lingering concerns about a regulatory clampdown on speculative trading.

Forex

The dollar index, a measure of the US currency against a basket of global peers, is up 0.1 per cent at 99.18, continuing to wallow in the wake of Friday’s disappointing US gross domestic product data for the March quarter and Monday’s news of weak factory activity in April.

The euro is down less than 0.1 per cent to $1.0892 and benchmark German Bund yields are flat at 0.33 per cent after news that eurozone’s manufacturing base grew last month at its fastest pace in six years.

Sterling is up 0.3 per cent to $1.2925 and benchmark gilt yields are steady at 1.09 per cent as traders absorb the latest Brexit developments and news that UK manufacturing activity hit a three-year high in April.

The Japanese yen is down 0.3 per cent to ¥112.14 per dollar, near its weakest in six weeks as easing risk aversion reduces demands for perceived havens.

The Australian dollar is flat against its US namesake at US$0.7520 after initially gaining when the central bank left monetary policy unchanged and delivered fairly upbeat commentary on economic conditions.

Fixed income

US Treasuries are trading cautiously ahead of the Federal Reserve’s monetary policy decision on Wednesday, and the monthly non-farm payrolls report on Friday.

Futures markets see a minimal chance the Fed will raise interest rates this week, but are pricing in a 67 per cent probability it will do so in June.

The US 10-year yield is 1bp weaker at 2.31 per cent, while the more policy-sensitive 2-year yield is also down 1bp at 1.27 per cent.

The US 30-year bond yield is down 1bp to 3.00 per cent, holding its highest level in three weeks as recent soft inflation data, which might normally help suppress yields, are counteracted by concerns about increased supply after Treasury Steven Mnuchin said the government is considering issuing ultra long-term bonds.

Greek 2-year bond yields slid 47bp to 5.94 per cent after Athens agreed a bailout deal with creditors.

Commodities

Oil prices are steadier after investor fretting about rising supply saw benchmarks trade near five-week lows at the start of the week.

Brent crude, which fell to $51.22 at one point on Monday, is down 0.2 per cent for the session to $51.44 a barrel, while West Texas Intermediate, the main US contract, is off 0.6 per cent to $48.56.

Gold is down $2 to $1,254 an ounce.

Additional reporting by Peter Wells in Hong Kong

For market updates and comment follow us on Twitter @FTMarkets