Global stocks extend biggest gains since 2020 on earnings

Bloomberg

Global stocks headed for the biggest four-day rally since November 2020 as companies from the US to Europe reported better-than-forecast earnings and dip-buying returned to technology shares.
Futures on the Nasdaq 100 Index jumped 1.1%, while those on the S&P 500 added 0.4%. Europe’s Stoxx 600 Index traded above its 50-day moving average for the first time since Jan. 21. Oil was steady near a seven-year high before an Opec+ meeting on increasing supply. Treasury yields and the dollar were marginally lower.
Investors have been swinging between nervousness over Federal Reserve tightening and confidence in the economic recovery as they navigate a volatile start to the year. A robust earnings outlook is helping to ease the uncertainty, at least for the moment. However, a wall of worries including stubborn inflation, regulatory risks in China and pandemic flare-ups still lingers in the background.
“Fed tightening is still the path forward,” said Dennis DeBusschere, founder of 22V Research. “But a short term rebound in equities will continue — led by growth and cyclicals — as investors focus on a narrative of ‘peak tightening’ ahead of what is likely to be a weak payroll report.”
MSCI Inc’s gauge of world stocks added 0.3% on Wednesday, taking its four-day increase to 4.5%. Novo Nordisk A/S contributed the most to advances in the European benchmark as traders welcomed its 2022 guidance and assurances on the supply of an obesity drug. Vodafone Group Plc. also advanced after sales growth beat expectations.
The moves mirrored overnight gains in the US, where strong earnings from Alphabet Inc. and Advanced Micro Devices Inc. fuelled a third-day advance. Of the 198 S&P 500 companies that have reported results so far, 80% have met or beaten estimates. Profits are coming in 5.2% above levels predicted.
The latest Fed commentary hinted at a calibrated approach to raising interest rates to fight high inflation, potentially soothing some investor worries that the economy will take a hit from tighter monetary policy.
None of six Fed officials speaking so far this week have backed the idea of a half-point rate increase in March, and the most aggressive, James Bullard, president of the St. Louis Fed, said five hikes — one more than every quarter — is “not too bad a bet.”
Treasury yields eased on Wednesday, with the 10-year rate shedding one basis point. The dollar weakened for a third day, amid gains for the euro and the British pound.
Traders continue to monitor tensions between the US and Russia over Ukraine. Western officials say that Russia has amassed more than 100,000 troops near the Ukraine border. Diplomatic talks have yet to make a breakthrough.
West Texas Intermediate crude futures were little changed. The Organisation of Petroleum Exporting Countries and its allies are expected to ratify another 400,000 barrel-a-day increase in supply for March.
Elsewhere, Australia’s central bank governor said the monetary authority will do what is necessary to maintain low and stable inflation, indicating that policy makers will act should prices accelerate too sharply. The local dollar ticked up.
Equities advanced in Japan and Australia, among the few markets open in the Asia-Pacific due to the Lunar New Year holiday.
The Stoxx Europe 600 rise 0.5% as of 8:41 am London time and futures on the S&P 500 also climb 0.4%.
While futures on the Nasdaq 100 rise 1.1%, futures on the Dow Jones Industrial Average falls by 0.1%.
The MSCI Asia Pacific Index rises 1% and the MSCI Emerging Markets Index also climbs as much as 0.2%.
The Bloomberg Dollar Spot Index falls 0.1% and the euro rises 0.1% to $1.1288.
While the Japanese yen rises 0.1% to 114.56 per dollar, the offshore yuan was little changed at 6.3663 per dollar and the British pound climbs 0.1% to $1.3540.