LDN - Business

Stocks climb on positive tech earnings, China rescue report

[January 24, 2024] By Tom Wilson and Ankur Banerjee

LONDON/SINGAPORE (Reuters) - Global shares rose on Wednesday, fuelled by positive tech earnings and optimism Chinese authorities will offer support to its stock markets, while the dollar showed resilience on growing expectations the U.S. Federal Reserve won't rush to cut rates.

European stocks climbed 0.8%, with tech stocks adding over 3.6% to their highest in two years.

Dutch chipmaking kit manufacturer ASML Holding rose nearly 6% after beating fourth-quarter earnings estimate and posting its best quarterly orders.

Investors are also focused on manufacturing purchasing managers' index (PMI) figures - seen as a good gauge of economic health - from the euro zone, Germany, France and Britain later in the day.

The European Central Bank (ECB) meets on Thursday and is widely expected to keep rates unchanged - though traders are pricing in as much as 130 basis points of interest rate cuts this year.

"There's an awful lot of optimism out there - positive momentum from the finish in the U.S. last night," said Michael Hewson, chief markets analyst at CMC Markets.

"But it's hard to escape the fact that we are very much in a range when it comes to UK and European markets," he added, with U.S. stocks performing better as the economy there stages a more robust recovery.

Wall Street was set to gain, with e-mini futures for the S&P 500 up 0.4% as investors focused on a slew of earnings.

On Tuesday, Netflix rallied 8% in extended trading after the video streaming service handily beat subscriber estimates in the fourth quarter.

The MSCI world equity index, which tracks shares in 47 countries, gained 0.3%.

The MSCI's broadest index of Asia-Pacific shares outside Japan gained 1%. Still, the index is down around 4.7% so far this month.

Investors in Asia have focused on Chinese stocks after a wretched start to the year.

Chinese authorities were preparing a package of measures worth $278 billion to stabilise the slumping stock market offered some hope markets may steady, though investors remained sceptical and unimpressed, Bloomberg reported on Tuesday.

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A passerby walks past an electric monitor displaying recent movements of various stock prices outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo

"I suspect policymakers would prefer markets to be more stable, but I doubt they plan to make huge unconditional injections into markets," said Ben Bennett, APAC investment strategist for Legal and General Investment Management.

China blue-chips added 1.4%, but hovered near five-year lows they have been trading at for the past week, while Japan's Nikkei closed 0.8% lower.

RESILIENT DOLLAR

The dollar index, which measures the U.S. currency against six rivals, fell 0.2% and was last at 103.32. [FRX/]

The index is up 2% this month, on course for its strongest monthly performance since September as traders walk back their expectations of early and steep Fed interest rate cuts.

This week, the spotlight will switch to the personal consumption expenditure data, the Fed's preferred inflation gauge, as well as the PMI readings, to assess the outlook for interest rates.

The Japanese yen, meanwhile, strengthened as investors firmed up bets that the Bank of Japan will exit stimulus in coming months.

The yen gained as much as 0.4% to 147.76 per dollar and Japanese government bond yields leapt to six-week highs, after the BOJ on Tuesday maintained its ultra-easy monetary settings but signalled conditions for phasing out its huge stimulus were falling into place.

The yield on 10-year U.S. Treasury notes was last at 4.097%, while the two-year Treasury yield, which typically moves in step with interest rate expectations, was at 4.314%.

Markets are now pricing in a 47% chance of a rate cut in March from the Fed, according to the CME FedWatch tool, compared to the 88% chance of a rate cut priced in a month earlier.

U.S. crude futures rose 0.2% to $74.55 per barrel and Brent futures were up 0.2% at $79.72. [O/R]

(Reporting by Tom Wilson in London and Ankur Banerjee in Singapore; Editing by Christian Schmollinger, Jamie Freed and Angus MacSwan)

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