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Stocks Extend Global Rally on Earnings, Bonds Fall: Markets Wrap

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Positive corporate earnings and improving business confidence in Germany, Europe’s largest economy, spurred a rally in global equities and dragged bonds lower as the Federal Reserve prepares to conclude its policy meeting.

Equity-index futures indicated an advance in U.S. and European stocks will extend to Asia on Wednesday after earnings from Caterpillar Inc. and McDonald’s Corp. led to outsize gains in the Dow Jones Industrial Average. The euro held near the highest in almost two years after German business confidence data beat expectations. Oil rose above $48 a barrel for the first time since early June.

More than 80 percent of S&P 500 companies have delivered earnings that have beaten forecasts so far this reporting period, helping to support optimism in the global economy and bringing down volatility levels to fresh record lows. Investors are looking for clues from the Fed on how it plans to reduce the balance sheet, with policy makers seen keeping interest rates on hold as the U.S. central bank meeting concludes on Wednesday. Inflation data in Australia will be closely watched ahead of a speech by the central bank chief there.

Read our Markets Live blog here.

Here are some key events coming up:

  • June quarter inflation data is due in Australia followed by a lunchtime speech on the labor market and monetary policy from central bank Governor Philip Lowe.
  • Fed policy makers will deliver their rate decision on Wednesday. The central bank will unveil the timing of its balance sheet unwind in September and wait until December to raise interest rates again, according to a Bloomberg survey of 41 economists. More on that here.
  • Donald Trump’s son and former Trump campaign Chairman Paul Manafort will go before Senate committees on Wednesday.
  • The U.S. economy probably gained traction in the second quarter as spending by American consumers picked up after a lull early this year.
  • Results from Facebook Inc., Deutsche Bank AG, Nomura Holdings Inc., BNP Paribas SA and UBS Group AG are among those expected this week.

Here are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index were little changed as of 8 a.m. in Sydney. The underlying gauge added 0.3 percent to close at a record 2,477.13 on Tuesday. The Dow Jones Industrial Average rose 100.26 points to finish just shy of its record from July 19. McDonald’s and Caterpillar added at least 4 percent to pace gains.
  • Futures on Japan’s Nikkei 225 Stock Average rose 0.5 percent. Contracts on Australia’s S&P/ASX 200 Index added 0.7 percent and those on Hong Kong’s Hang Seng Index advanced 0.2 percent.
  • The Stoxx Europe 600 Index rose 0.4 percent.

Currencies

  • The euro held at $1.1647.
  • The Bloomberg Dollar Spot Index rose 0.2 percent on Tuesday.
  • The yen traded at 111.87 per dollar after declining 0.7 percent on Tuesday in its first retreat in more than a week.

Commodities

  • West Texas Intermediate crude rose 1.3 percent in early trading, extending a 3.3 percent surge, its largest jump since November. Crude inventories declined by 10.2 million barrels last week in an American Petroleum Institute report released Tuesday, people familiar with the data said.
  • Copper posted its highest close in more than two years on Tuesday. The metal for three-month delivery rose 3.3 percent to settle at $6,225 a metric ton in London.

Bonds

  • The yield on 10-year Treasuries rose eight basis points to 2.33 percent, the most in a month. Germany’s 10-year bund yield rose six basis points to 0.566 percent.

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