Strong earnings lift global equities

London — World stock markets inched higher on Friday as strong earnings helped to underpin investor sentiment in the face of growing signs that the global economy is slowing and a still unresolved trade dispute between the US and China.

The euro recovered lost ground against the dollar after falling to its lowest in six weeks following Thursday’s European Central Bank (ECB)meeting.

European markets opened firmer, with the carmakers and tech sector indices rising 1.5% and 1% respectively. The pan-European Stoxx index hit its highest since December 4, up 0.8% on the day.

The gains came as stocks rose overnight in Asia and the US on the back of strong earnings from US tech firms.

MSCI’s All-Country World Index, which tracks shares in 47 countries, was up 0.3% on the day. But the gauge was set to break a four-week streak of gains as weak economic data and cautious soundings from central banks pulled the index 0.5% down on the week.

Data at the start of the week showed China’s economy grew at its slowest in 28 years in 2018, while purchasing manager indices in Germany and the eurozone indicated stagnation in the bloc. On Thursday, the ECB alluded to downside risks to growth for the first time in its statement since April 2017, while Germany cut its economic growth forecast for 2019.

Slowdown

Sombre news continued to trickle in on Friday, with German business morale falling for the fifth consecutive month in January according to the Ifo business climate index.

According to the latest Reuters polls of hundreds of economists from around the world, a synchronised global economic slowdown is under way and any escalation in the US-China trade war would trigger a sharper downturn.

Investors seemed to view the glass as half-full.

In a note to clients, UBS Global Wealth Management chief investment officer Mark Haefele said that rhetoric on US-China trade has become more positive, and that Beijing has taken steps to stimulate its economy.

“While economic and earnings growth is slowing, we believe it is unlikely that growth will drop far below trend,” he said.

“At the same time, there are reasons to be cautious about policymakers’ ability to follow through on their rhetoric.”

Chinese Vice-Premier Liu He will visit the US on January 30 and 31 for the next round of trade negotiations with Washington.

The two sides are “miles and miles” from resolving trade issues but there is a fair chance they will get a deal, US commerce secretary Wilbur Ross said on Thursday.

In currencies, the dollar fell 0.2% against a basket of peers to 96.422.

The euro was up 0.2% at $1.13280, recovering from a six-week low hit in the wake of ECB President Mario Draghi’s downbeat comments on Thursday.

The ECB’s post-meeting statement for the first time since April 2017 alluded to downside risks to growth.

The British pound was up 0.2% at $1.3076 after brushing a two-month high of $1.3140, lifted after The Sun reported on Thursday that Northern Ireland’s Democratic Unionist Party has privately decided to back May’s Brexit deal next week if it includes a clear time limit to the Irish backstop.

The benchmark 10-year US treasury note yield was slightly higher at 2.729% after dropping to a one-week low as pessimism over global growth supported safe-haven government debt.

Crude oil extended gains after rallying the previous day as the US threatened sanctions on Venezuela’s crude exports as the country descended further into political and economic turmoil.

US crude oil futures were up 0.7% at $61.52 a barrel after gaining 1% on Thursday. 

Reuters