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Global Stocks Edge Higher Ahead of U.S. Markets Open

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04/26/2018 | 01:16pm CEST

By Mike Bird and Ese Erheriene

European stocks and U.S. equity futures ticked higher Thursday after a bumper day for first-quarter earnings reports.

The Stoxx Europe 600 was up 0.4% in ahead of the U.S. open, while S&P 500 futures were up 0.2%. That followed a selloff in stocks in Hong Kong and China.

First-quarter U.S. earnings have been stronger than expected, but the selloff in bond markets is preventing stocks from rising much further in price, according to some analysts.

U.S. 10-year Treasury yields were at 3% shortly before U.S. markets opened. Earlier this week the yield rose above 3% for the first time since early 2014. Germany's 10-year bund yields dropped slightly, from 0.63% to 0.61%.

"Of the 155 S&P 500 companies that have reported thus far, 81% have beaten expectations," said Fahad Kamal, senior markets strategist Kleinwort Hambros. "Still, rising bond yields keep animal spirits at bay."

Investors were looking ahead to the European Central Bank meeting later Thursday for guidance on the path for monetary policy, but most expected no concrete moves on interest rates or the eurozone's bond-buying program.

"The [ECB] governing council may want to wait for more economic data and the June economic projections before taking a clearer stance on the direction of monetary policy going forward," said analysts at ABN Amro in a research note Thursday morning.

In Europe, major banks rebounded from initial declines after releasing earnings reports.

Deutsche Bank posted a 79% drop in net income during the first quarter. Shares were up 0.1% in morning European trading, rebounding from an initial drop. Likewise, Barclays PLC initially fell 2% on a net loss of GBP764 million ($1.06 billion) in the first quarter, before rising by 11%.

U.S. earnings announcements after the market closed Wednesday were dominated by Facebook, which reported a 63% year-on-year increase in net income during the first quarter, sending the stock 7% higher in after-hours trading.

In currency markets, the WSJ Dollar index was down 0.1%, but remained close to its highest level since early January. The euro was up 0.2% at $1.218.

Stocks in Asia were mixed, with Japan's Nikkei 225 closing up 0.47%, while indexes in China sold off.

China's Shenzhen A-Share Index ended the day down 2.2%, and Hong Kong's Hang Seng fell 1%.

Late Wednesday, China's State Council unveiled additional tax-relief policies intended to support high-tech companies, startups and small firms.

Ivan Ip, a market strategist at UOB Kay Hian, said Thursday's market movement showed investors weren't interpreting the tax-relief policies as good news, and were instead concerned that U.S.-China trade frictions might spread further into the tech sector.

Chinese markets are poised to stay weak and volatile in the short-term "without major policies to boost the economy in China," said Castor Pang, head of research at Core Pacific-Yamaichi International.

Tech continued to underperform in Hong Kong. The sector has been hit by trade concerns fueled by the U.S. ban on sales of American products to major Chinese telecom-equipment firm ZTE.

Smartphone-component maker AAC Technologies is on pace for a record 12th straight decline: It was recently down 3.5% to an eight-month low. Lens maker Sunny Optical skidded 9.3%, returning to levels last seen during early February's global stock slide.

Korea's Kospi was up 1.1% as heavyweight Samsung Electronics rebounded. It rose 3.5% following the release of its complete first-quarter results, reporting its fourth consecutive quarter of record operating profits.

Additionally, data showed South Korea's first-quarter GDP rose 3.5% from a year earlier.

In oil markets, prices continued to trend higher. Brent crude rose by another 0.8% to $74.60, close to its highest levels since late 2014.

James Glynn contributed to this article.

Write to Mike Bird at [email protected] and Ese Erheriene at [email protected]

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.25% 24083.83 Delayed Quote.-2.57%
HANG SENG -1.16% 29999.34 Real-time Quote.2.43%
KOSPI COMPOSITE INDEX 1.33% 2474.09 Real-time Quote.0.21%
NASDAQ 100 0.08% 6513.9405 Delayed Quote.1.76%
NASDAQ COMP. -0.05% 7003.7375 Delayed Quote.3.26%
NIKKEI 225 0.47% 22319.61 Real-time Quote.-2.14%
S&P 500 0.18% 2639.4 Real-time Quote.-1.46%
US DOLLAR INDEX 0.44% 91.17 End-of-day quote.-0.75%
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