Stocks rise with earnings in focus, markets eye Mideast tensions

[October 17, 2023]  By Selena Li and Alun John

HONG KONG/LONDON (Reuters) - Stocks edged higher and bond prices slid on Tuesday as markets continued to retrace last week's moves to safe-haven assets, focusing on corporate earnings prospects and the resilience of the U.S. economy rather than tensions in the Middle East.

Europe's broad STOXX 600 index rose 0.25%, a second day of gains, after Asian stocks had climbed earlier in the day, and the S&P 500 had closed up 1% on Monday.

Those moves marked something of a reversal after world shares slid on Friday, as traders sought to derisk their positions heading into the weekend when there was scope for geopolitical developments when markets were closed.

In addition, a host of "favorable" signs from the strength of the U.S. consumer, economic growth, and interest rates supporting bank profits, gave reasons for hope, said Kerry Craig, a global market strategist at J.P. Morgan Asset Management.

However, investors are also trying to assess risks that a wider conflict breaks out in the Middle East which remains a "very fluid situation", Craig said.

Benchmark 10-year bond yields in the U.S. and Germany rose 2-3 basis points having risen 5-8 bps Monday - bond yields move inversely to prices.

The 10-year Bund yield was last 2.793%, and the 10-year Treasury yield 4.7375%, having fallen 15 basis points last week - the biggest weekly decline since mid-July - and dipped as low as 4.53%, a sharp reversal from early October's 16-year high of 4.887%.

"The basic theme in core (European) debt markets yesterday seemed to be a reversal of the risk-off tone that predominated on Friday," said Rabobank strategists in a note.

QUARTERLY RESULTS

Top of mind for investors later on Tuesday are quarterly results from Goldman Sachs and Bank of America, after JPMorgan, Wells Fargo and Citigroup solidly beat expectations last Friday.

Morgan Stanley, pharmaceutical giant Johnson & Johnson, Tesla and Netflix due later in the week.

In Middle East developments, U.S. President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has raised fears of a broader conflict with Iran.

A man looks at an electric board displaying the Nikkei stock average outside a brokerage in Tokyo, Japan June 14, 2023. REUTERS/Kim Kyung-Hoon/File Photo

Iran's Foreign Minister said Israel would not be allowed to act in Gaza without consequences, warning of "preemptive action" by the "resistance front" in the coming hours.

Israel's shekel remained on the weak side of the 4 per dollar level it softened to for the first time since 2015 on Monday.

Russian President Vladimir Putin on Tuesday arrived in Beijing to meet with Chinese President Xi Jinping even as the war in Ukraine raged on.

The widely watched trip is aimed at showcasing the trust and "no-limits" partnership between the countries, as Beijing is moving to strengthen ties with counties for its infrastructure-focused Belt and Road initiative.

In a reminder of problems in China's property sector, however, Tuesday marks the end of a 30-day grace period on a late payment from developer Country Garden. If investors do not receive the coupon payment, all of Country Garden's offshore debts will be deemed in default.

In currency markets, the dollar index, which tracks the unit against six main peers was up 0.14% at 106.3, gaining on the euro, poundand yen.

The Swiss franc was last at 0.9509 per euro after the common currency had fallen 0.9% against the safe haven on Friday to 0.94975, its lowest in a year.

Gold edged away from Friday's three-week high of $1,932.53 an ounce and was last at $1,918.5 an ounce, and oil prices steadied after sliding more than $1 on Monday amid hopes the U.S. would ease sanctions on producer Venezuela and as Washington stepped up efforts to prevent an escalation of the war between Israel and Hamas.

Brent crude futures were 0.1% higher at $89.70 a barrel.

(Reporting by Selena Li in Hong Kong and Alun John in London, Editing by Shri Navaratnam and Ed Osmond)

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