Stocks struggle with focus on earnings

BLOOMBERG

European stocks and US equity futures struggled for direction as traders weighed the latest corporate earnings reports at the start of a week packed with economic data that may help illuminate the path for interest rates.
The Stoxx Europe 600 was little changed, with energy companies leading declines as crude prices extended last week’s slump. Banks gained, with UBS Group AG climbing more than 2% after takeover target Credit Suisse AG reported outflows that were lower than some analysts had expected. Royal Philips NV jumped more than 12% after easing supply-chain pressures helped drive strong first-quarter earnings for the Dutch medical technology firm.
Contracts for the S&P 500 and the Nasdaq 100 slipped following a muted end to trading last week. MSCI Inc’s Asia Pacific Index was on course for the lowest close since the end of March. Treasury yields fell and a gauge of the dollar was steady.
Leveraged investors boosted net short positions on 10-year Treasury futures to a record 1.29 million contracts as of April 18, data from the Commodity Futures Trading Commission show. That’s an indication they think the Federal Reserve will keep raising rates to tackle inflation. Big-tech earnings will be parsed for insights into the effect of higher borrowing costs and a struggling economy.
“Earnings estimates for the back half of the year in the US remain too optimistic; we do still see a mild recession ahead,” Laura Cooper, a senior investment strategist at BlackRock International Ltd, said on Bloomberg TV. “So we are really more selective in our equity space and crucially, earnings will provide some colour on guidance going forward and that could tilt out view a bit.”
Swaps markets continue to see Fed rates peaking in coming weeks before a series of cuts later this year. US GDP data is forecast to reveal slowing growth, while the so-called core PCE deflator, the central bank’s preferred inflation gauge, is expected to show price growth cooled.
“We should take the Fed at face value when they say rates are not going lower this year,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privée in Singapore, on Bloomberg Television.
Elsewhere, the euro-area will publish GDP data and there will be a policy decision in Sweden. Data showed Germany’s business outlook unexpectedly improved for a sixth month as the economy gradually recovers from the energy shock. The euro gained against the dollar.
A global gauge of cross-asset volatility remained near the lowest since February 2022, while other volatility gauges, such as the VIX Index and the ICE BofA Move Index, are also well below recent highs.