European Stock Gains Curbed by Tumbling Oil Shares: Markets Wrap

(Bloomberg) — European stocks edged higher after another record high on Wall Street as traders looked forward to the day’s major US bank earnings. Oil dropped as concerns eased about Israel attacking Iranian energy facilities.

The Stoxx 600 index rose 0.3%, with its gains limited by sliding shares in oil producers. TotalEnergies SE dropped 4.2% and BP Plc was down 3.5%. Brent crude futures slumped below $75 a barrel after the Washington Post reported that Israel doesn’t plan on striking Iranian oil or nuclear facilities.   

US equity futures were flat after the S&P 500 hit its 46th record high of 2024, with Nvidia Corp. leading gains among megacaps, having eased concerns about product delays and its long-term growth prospects. Treasury yields ticked lower on Tuesday as the dollar gained against most of its Group-of-10 peers. 

With earnings poised to drive US sentiment this week, investors appear not to be deterred by reduced profit forecasts and are instead betting on positive surprises. Reports due today include Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp. 

Mark Haefele, chief investment officer at UBS Global Wealth Management, expects earnings to be lower than in the second quarter due to higher prices of gasoline and oil during the period, but maintains his S&P 500 earnings growth forecast for the year. 

“We believe the third-quarter results should confirm that large-cap corporate profit growth is solid against a resilient macro backdrop,” Haefele wrote in a note. 

The US earnings season unofficially kicked off on Friday, led by financial bellwethers JPMorgan Chase & Co. and Wells Fargo & Co. On top of other big banks reporting this week, traders will be paying close attention to results from key companies like Netflix Inc. and JB Hunt Transport Services Inc.

An initial round of third-quarter financial results last week showed Corporate America is benefitting from lower rates early into the Federal Reserve’s easing cycle, according to Bank of America Corp. strategists including Ohsung Kwon and Savita Subramanian.

In other news, Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other American companies on a country-specific basis, people familiar with the matter said, a move that would limit some nations’ artificial intelligence capabilities.

Meanwhile, shares in China and Hong Kong slid, with investors on the watch for further stimulus from the Chinese government. Equity benchmarks in the country had risen on Monday even after a highly anticipated Finance Ministry weekend briefing lacked specific new incentives to boost consumption in the world’s biggest crude importer.

“This is the not the ‘bazooka’ some have been calling for, if defined as a major expansion in fiscal stimulus,” said Michael Hirson and Houze Song of 22V Research, in a note. “At face value, it basically continues China’s current incremental approach.”

Chinese banks are set to trim rates on 300 trillion yuan ($42.3 trillion) of deposits as soon as this week after the latest barrage of stimulus policies further squeezed their profitability, according to people familiar with the matter.

Still, there are more signs of economic weakness as a report Monday showed export growth in September unexpectedly climbed just 2.4% in dollar terms from a year earlier to the lowest level since May. 

Japanese stocks were among the biggest gainers in Asia Tuesday. The yen was the best performer among G-10 currencies and remained not far from 150 versus the dollar, a key psychological level with a risk of intervention in focus for investors. 

Key events this week:

• Eurozone industrial production, Tuesday
• Goldman Sachs, Bank of America, Citigroup earnings, Tuesday
• Fed’s Mary Daly, Adriana Kugler speak, Tuesday
• Morgan Stanley earnings, Wednesday
• ECB rate decision, Thursday
• US retail sales, jobless claims, industrial production, Thursday
• Fed’s Austan Goolsbee speaks, Thursday
• China GDP, Friday
• Fed’s Christopher Waller, Neel Kashkari speak, Friday

Some of the main moves in markets: 

Stocks

• The Stoxx Europe 600 rose 0.3% as of 8:32 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average rose 0.2%
• The MSCI Asia Pacific Index fell 0.3%
• The MSCI Emerging Markets Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0894
• The Japanese yen rose 0.4% to 149.23 per dollar
• The offshore yuan fell 0.5% to 7.1279 per dollar
• The British pound was little changed at $1.3061

Cryptocurrencies

• Bitcoin fell 0.3% to $65,703.99
• Ether fell 0.2% to $2,615.83

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.08%
• Germany’s 10-year yield declined four basis points to 2.23%
• Britain’s 10-year yield declined three basis points to 4.21%

Commodities

• Brent crude fell 4% to $74.40 a barrel
• Spot gold rose 0.2% to $2,653.41 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Shery Ahn, Jason Scott and Yasutaka Tamura.

©2024 Bloomberg L.P.