Stocks muted before major earnings test for Wall Street

BLOOMBERG

European stocks and US futures kept to small ranges as investors looked forward to a rush of major earnings for insights on whether the record-breaking rally on Wall Street can continue.
Europe’s Stoxx 600 crept to a new two-year high as media and travel and leisure stocks led gains. US equity futures were steady after another record close on Wall Street stretched the S&P 500’s gains this month to 3.3%.
The Nasdaq 100 has surged 4.6%. Stocks in Asia slipped, led by declines in China amid growing pressure on policymakers to cut rates to boost the economy.
US earnings grab the limelight as the busiest week so far of this reporting season moves up a gear. Microsoft Corp and Alphabet Inc kick-off updates from megacap tech’s so-called Magnificent Seven, providing the first test of whether the bullish sentiment around the group looks sustainable.
The tech rally has been fuelled by expectations of strong earnings supported by interest-rate cuts from the Federal Reserve. While the Fed is expected to hold rates this week, investors are keenly awaiting comments from Chair Jerome Powell after Wednesday’s decision for clues on the policy outlook. Traders are assigning roughly even odds to the prospect that the central bank will start lowering borrowing costs at its next meeting in March. Treasury yields extended their drop after a cut in the quarterly borrowing estimate by the US Treasury eased concerns about the flood of debt being issued to cover the federal deficit. The dollar was steady. In Asia, Hong Kong stocks fell more than 2%, while those on the mainland were poised to decline for a third day.
The impact of China Evergrande Group’s liquidation order pushed a Bloomberg index of Chinese developers over 4% lower.
“Valuations are clearly cheap, but for good reasons including self-inflicted damage to the tech and real estate sectors,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee.
China’s benchmark government bond yield fell to its lowest in nearly 22 years as mounting expectations for further monetary easing increased. The Stoxx Europe 600 rose 0.2% in London. S&P 500 futures were little changed. Nasdaq 100 futures were little changed. Futures on the Dow Jones Industrial Average fell 0.2%. The MSCI Asia Pacific Index fell 0.4%. The MSCI Emerging Markets Index fell 0.6%.