A premarket rebound in US tech shares lifted global equity sentiment on Thursday, as upbeat earnings guidance from electric carmaker Tesla Inc. and others assuaged recent disappointments.
(Bloomberg) — A premarket rebound in US tech shares lifted global equity sentiment on Thursday, as upbeat earnings guidance from electric carmaker Tesla Inc. and others assuaged recent disappointments.
Contracts on the Nasdaq index rose about half a percent, with Tesla up about 8% in premarket New York trading, after the firm beat profit estimates and sales, and chief executive Elon Musk predicted a rise in vehicle sales this year. Its report, alongside those from International Business Machines Corp., relieved some of the sting of Microsoft Corp.’s dire sales warning that had sapped tech shares earlier in the week.
In Europe too, results from telecoms group Nokia Oyj and chipmaker STMicroelectronics NV were applauded by investors, helping to lift the Stoxx 600 index by half a percent.
“Earnings have not been great but they are not disastrous either,’ said Rupert Thompson, chief economist at asset manager Kingswood Holdinds Ltd. “Instititional investors have been short equities so you are seeing some of those positions being covered.”
Thompson sees the January stock surge as overdone, given recession risks ahead, but did not discount further short-term gains because “if you do get a 5% pullback, people who missed the rally may think ‘shall we just bite the bullet now rather than wait for another 5% fall?”
The buoyant mood in markets was also down to China, where holiday spending and tourism data suggested a recovery is gaining traction in Hong Kong and the mainland. On the first trading day following the Lunar New Year break, the Hang Seng Index jumped 2.4% to close at its highest since March 1.
Soft-landing bets for the US economy and expectations the Federal Reserve is nearing the end of its rate-hiking cycle have lifted stock markets and put the dollar on course for its worst monthly performance since last May. On Thursday, it held around flat against its Group-of-10 peers as investors awaited economic growth and jobs data as well as a core price index that could determine the Fed’s policy path.
The euro retreated after six days of gains versus the greenback, though it is likely to enjoy continued monetary policy support, as several European Central Bank rate-setters spoke in favor of further hefty policy-tightening over coming months.
Bond yields across the euro zone inched higher. The Canadian dollar held near a one-week low versus the dollar after the central bank on Wednesday called time on its policy-tightening with one last rate hike.
However as the S&P 500 ends January with its best start to the year since 2019, there is a growing chorus of buyside and sellside voices saying the rally has no staying power, given pressure on earnings and central banks’ reluctance to ease policy while inflation remains near decade-highs. Canada for instance, cautioned it could return to raising rates, depending on economic data.
Read more: This Record New-Year Rally Has Very Few Fans: Taking Stock
Saira Malik, chief investment officer of Nuveen, said earnings risk in a consumer-led slowdown will act as a headwind to equities, with a shift into bonds underscoring the fragile sentiment.
“You can start to increase your duration in fixed-income and get strong total returns in it without a lot of these heavy macro risks that are going to hit equities,” Malik said in an interview with Bloomberg TV. “Equities considering their valuation are less attractive.”
Elsewhere, oil prices rose for a second day, lifted by expectations of demand recovery in China. Bitcoin fell more than 2%, reversing much of Wednesday’s gain.
Key events:
- Earnings for the week include: American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)
- US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
- US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 5:46 a.m. New York time
- Nasdaq 100 futures rose 0.6%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0906
- The British pound was little changed at $1.2395
- The Japanese yen fell 0.1% to 129.76 per dollar
Cryptocurrencies
- Bitcoin fell 2.7% to $22,958.51
- Ether fell 0.9% to $1,604.61
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.47%
- Germany’s 10-year yield advanced two basis points to 2.18%
- Britain’s 10-year yield advanced four basis points to 3.28%
Commodities
- West Texas Intermediate crude rose 0.9% to $80.91 a barrel
- Gold futures fell 0.3% to $1,954.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Brett Miller and Joe Easton.
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