A look at the day ahead in U.S. and global markets from Mike Dolan
As a frenetic period of macro and corporate news calms, investors have emerged pretty buoyant about the state of world markets – with global stock indexes clocking 2-year highs on Wednesday.
Rising hopes this week for some durable ceasefire in the 4-month Gaza conflict also helped calm market anxiety about how any escalating regional conflagration may start to affect energy and shipping costs.
But even as Chinese authorities still struggled to draw a line under the relentless market rout there – and Hong Kong stocks slipped back again on Wednesday despite further mainland market gains – the picture elsewhere was brighter.
Incoming U.S. company earnings are tallying with a picture of robust – possibly even accelerating – economic growth.
With over half of S&P 500 companies having reported fourth-quarter updates, more than 80% have beaten forecasts and aggregate annual earnings growth for the three months is tracking 8.1% – almost twice expectations just a month ago.
And many big firms around the world were chiming with that.
Toyota shares, for example, hit a record high on Wednesday after a forecast upgrade this week and amid expectations Japanese automakers’ solid hybrid lineups are benefiting from cooling interest in electric vehicles.
Disney and Uber top the diary for another busy day ahead on Wall St.
While the picture of brisk growth has unnerved bond markets to some extent early this week, Treasury yields remained under wraps for a second day – with $42 billion of 10-year notes up for auction later in the session. The dollar index edged back lower and stock futures were steady.
Fed officials continue to be equivocal about the timing of interest rate cuts this year, but are clearly in no rush to move. Still, futures remain almost fully priced for a first cut in May and 120 basis points of easing through this year.
But not everything is rosy, with the latest U.S. regional bank stock wobble worrying some.
Shares in the ailing New York Community Bancorp fell again, down almost 10% before Wednesday’s bell after Moody’s ratings firm cut the bank’s credit rating to junk and warned of further downgrades ahead.
With analysts expressing caution about “governance risks” at the bank, its troubles have infected the broader regional bank universe. The KBW Regional Banking index finished down 1.4% on Tuesday, marking a 12.6% drop over six sessions.
In Europe, the picture from central bankers is similar to the Fed – with some slight variations from the Bank of England on Wednesday and also leading European Central Bank officials.
Equinor shed 3.7% after the Norwegian oil and gas producer posted higher-than-expected operating profit for the quarter, but said it would cut its overall payments to shareholders in 2024.
In politics, this year’s U.S. election stayed top of mind.
Donald Trump does not have immunity from charges he plotted to overturn his 2020 election defeat, a federal appeals court ruled on Tuesday, bringing the former U.S. president a step closer to an unprecedented criminal trial and likely kicking the issue up to the Supreme Court. A Trump campaign spokesperson said the ruling “threatens the bedrock of our Republic”.
Key diary items that may provide direction to U.S. markets later on Wednesday:
* U.S. Dec international trade balance, Canada Dec trade balance
* Federal Reserve Board Governor Adriana Kugler, Fed Board Governor Michelle Bowman, Boston Fed President Susan Collins, Richmond Fed chief Thomas Barkin all speak. Bank of Canada policy meeting minutes,
* U.S. Treasury sells $42 billion of 10-year notes
* U.S. corporate earnings: Walt Disney, Uber, Paypal, News Corp, Fox Corp, CVS, Hilton Worldwide, Wynn Resorts, Yum! Brands, Emerson Electric, Molina Healthcare, Paycom, Everest, Mckesson, Globe Life, Equifax, STERIS, Fleetcar, Allstate, Bunge, CDW, Fox, Ceridian HCM, Monolithic Power Systems
(By Mike Dolan mike.dolan@thomsonreuters.com; Editing by Alison Williams)
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