Stocks gain on positive earnings updates and China stimulus

BLOOMBERG

Stocks gained as investors rewarded companies for positive earnings updates and as China’s latest move to stimulate its economy boosted resources shares. Europe’s Stoxx 600 index climbed 0.8% as mining stocks jumped the most in almost six weeks after the People’s Bank of China said it would cut the reserve requirement ratio for banks on February 5. The move should boost the economy by freeing up liquidity for customer loans and bond purchases.
US equity futures gained, led by tech stocks, after Wall Street set fresh closing highs. Asian stocks advanced, with Chinese shares traded in Hong Kong extending their rally after the stimulus news.
In earnings updates, ASML Holding NV soared after Europe’s most valuable technology company said orders more than tripled last quarter from the previous three months as demand for its most-sophisticated machines soared, in a sign that the semiconductor industry may be recovering.
SAP SE jumped as Europe’s biggest software maker unveiled a restructuring plan that will affect about 8,000 jobs and an increased focus on artificial intelligence, moves that it said would help boost operating profit to roughly €10 billion next year. The line-up of US earnings due Wednesday includes Tesla Inc, International Business Machines Corp, AT&T Inc and Abbott Laboratories. Netflix Inc rallied in extended trading after the streaming-video company subscriber numbers that were much stronger than expected.
The benchmark 10-year US Treasury yield slipped after edging higher. A gauge of the dollar retreated after two days of gains. In Japan, the 10-year sovereign yield briefly rose more than 10 basis points after Governor Kazuo Ueda said that the certainty of achieving the Bank of Japan’s price projections has continued to rise. Traders judged the comments as hawkish, spurring a decline in the Nikkei 225 index and strengthening the yen against the dollar. “We’ve seen some strength in the Japanese yen across the board, and that is pulling the mighty Nikkei further down from its highs,” said Matt Simpson, a senior market strategist at City Index. “Given the magnitude of the rally into its multi-year highs, a retracement seems like a deserved rest for bulls as opposed to a bearish reversal to be concerned with.”
Swap markets are pricing in a 75% chance of a 25-basis-point rate increase by the BOJ in April, compared with 44% at the end of last week.
Former President Donald Trump won the New Hampshire primary, dealing a blow to his only remaining major rival Nikki Haley and solidifying his status as the Republican party’s likely nominee.
In Europe, German stocks as well as cyclical sectors with a high correlation to world trade — like industrials, chemicals and autos — look the most vulnerable in the event of a Republican/Trump election victory, according to Goldman Sachs Group Inc strategists.
That’s due to the higher risks around both an increase in tariffs on Europe and a reduction in US funding and support for Ukraine, a Goldman team led by Sharon Bell wrote in a note.
Elsewhere, Bitcoin rebounded after slumping for a second day. Oil edged higher as sign of lower US inventories was balanced by expectations for increased supplies.