Shares, oil and gold rise after global earnings reports

London — Stocks, crude oil and gold rose while the dollar eased on Thursday as investors sifted through earnings reports, German inflation data and Federal Reserve policymaker speeches for clues on how many interest rate hikes lay ahead.

On the corporate news front, Credit Suisse Group reported its worst annual loss since the global financial crisis in 2008, sending its shares lower.

That was countered by better-than-expected earnings from Siemens and Britain’s AstraZeneca, helping to pierce uncertainty over the interest rate outlook.

A number of Federal Reserve speakers echoed chair Jerome Powell on Wednesday in saying that interest rates are set to go higher, capping risk sentiment, ahead of US inflation data next week.

Sweden’s central bank on Thursday raised its key interest rate by half a percentage point to 3%, and forecast further tightening in the northern hemisphere spring.

The Stoxx index of European shares rose 0.8%, after touching nine-month highs on Wednesday as investors pinned hopes on peaking inflation and a major recession now looking less likely on the continent.

“European markets are still fairly positive as the case for investing in the US is much lower because valuations there are much higher and ability to grow earnings harder,” said Mike Hewson, chief market analyst at CMC Markets.

“I think there will be outperformance in Europe simply because energy prices have come down a lot more than perhaps was thought to be the case last year,” Hewson said.

German consumer prices, harmonised to compare with other EU countries, rose by a less-than-anticipated 9.2% on the year in January, helping to reassure markets that prices have peaked.

“It’s not going to change the ECB’s mind for a 50 basis point rate hike in March,” Hewson said.

The MSCI all country stock index was up 0.2%, building on gains of about 7.5% so far in 2023 after a loss of 20% in 2022.

“We are still caught in this vacillating macroeconomic dymanic with risk on, risk off again. People are still calibrating their way through what normal growth looks like,” said Paul Major, manager of Bellevue Healthcare Fund.

It was unclear if China will come “roaring back” in the second half of the year to drive the global economy, and if it does, whether that would trigger another round of inflationary pressures, Major said.

“The US is on fire … I think I would want to be overweight US equities for the next three to five years because they’ve got energy independence, a robust economy,” Major said

Firmer S&P 500 futures and Nasdaq futures were also underpinning sentiment in Europe and Asia.

Asia turns higher

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6%, after being down earlier in the session, although Japan’s Nikkei remained slightly weaker.

China’s blue chips rose 1.3%, pulling away from its one-month trough, while Hong Kong’s Hang Seng index was up 1.6%.

Barclays upgraded its forecast of China’s economic growth to 5.3% in 2023, from 4.8% previously, while Fitch revised up their forecasts on China’s economic growth this year to 5%. Both cited accelerated recovery in consumer spending.

“We expect the pace of recovery to strengthen further in quarter two on improving infrastructure investment and a gradual recovery in the housing market, before normalising in the second half,” said analysts at Barclays.

Overnight, sentiment took a hit as Alphabet shares fell 7.7% after its new AI chatbot Bard delivered an incorrect answer in a promotional video, dragging the S&P 500 and Nasdaq lower by more than 1%.

“Now that inflation has passed its peak and many central banks have begun to slow the pace of policy tightening, markets are back to scouring their communications for evidence of what’s to come,” said Jennifer McKeown, chief global economist at Capital Economics.

The bond market rallied a little after being caught wrong-footed by the January blockbuster US jobs report, forcing many to reposition for a higher peak in the Fed funds rate.

The two-year treasury yield, which rises with traders’ expectations of higher Fed fund rates, eased to 4.4295% on Thursday, while the yield on benchmark 10-year treasury notes slid to 3.6107%.

Futures are pricing in the Fed’s target rate to peak at 5.122% in July, about 25 basis points higher than last week, and that by December it will have declined to 4.804%, a jump of about 40 basis points since a week ago.

In the currency markets, movements were rather muted. The dollar index slid 0.37% but held close to a one-month high at 103.05 against major peers, after last week’s stunning jobs and services data.

In the oil market, Brent crude futures gained 0.3% to $85.34 while US West Texas Intermediate (WTI) crude rose 0.3% to $78.68.

Gold was slightly higher. Spot gold traded at $1,882/oz, up 0.45% on the day.

Reuters