European stocks experienced modest gains on Tuesday, buoyed by another record high on Wall Street, as traders awaited significant US bank earnings reports.
European Market Performance
The Stoxx 600 index increased by 0.3%, although its gains were tempered by declining shares of oil producers. TotalEnergies SE saw a decrease of 4.2%, while BP Plc fell by 3.5%. Meanwhile, Brent crude futures dropped below $75 a barrel following a report from the Washington Post indicating that Israel has no plans to strike Iranian oil or nuclear facilities.
US Market Insights
In the US, equity futures remained stable after the S&P 500 recorded its 46th all-time high for 2024. Nvidia Corp. led the gains among large-cap stocks, alleviating concerns regarding product delays and its long-term growth potential. Treasury yields decreased slightly, while the dollar appreciated against most currencies in the Group of 10.
Earnings Season Anticipation
Investors seem undeterred by lowered profit forecasts ahead of a week filled with earnings reports, betting instead on positive surprises. Major reports set for release today include those from Citigroup Inc., Goldman Sachs Group Inc., and Bank of America Corp.
Expert Outlook
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, anticipates that earnings will be lower compared to the second quarter due to rising gasoline and oil prices. However, he maintains his growth forecast for S&P 500 earnings 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 noted.
US Earnings Season Kickoff
The unofficial kickoff of the US earnings season began last Friday, led by financial giants JPMorgan Chase & Co. and Wells Fargo & Co. In addition to other major banks reporting this week, investors will closely monitor results from key companies such as Netflix Inc. and JB Hunt Transport Services Inc.
Corporate America’s Performance
An initial round of third-quarter financial results released last week indicated that Corporate America is benefiting from lower interest rates during the early phases of the Federal Reserve’s easing cycle, according to strategists at Bank of America Corp., including Ohsung Kwon and Savita Subramanian.
AI Chip Sales Discussions
In other developments, officials from the Biden administration are reportedly discussing plans to impose country-specific caps on sales of advanced AI chips from companies like Nvidia. This move aims to limit certain nations’ artificial intelligence capabilities.
Asian Market Trends
In Asia, shares in China and Hong Kong fell as investors anticipated further stimulus measures from the Chinese government. Despite a rise in equity benchmarks on Monday, a highly anticipated briefing from the Finance Ministry lacked specific new incentives to boost consumption in the world’s largest crude importer. Michael Hirson and Houze Song of 22V Research stated, “This is not the ‘bazooka’ some have been calling for, if defined as a major expansion in fiscal stimulus. At face value, it essentially continues China’s current incremental approach.”
Chinese Banking Policies
Additionally, Chinese banks are expected to lower rates on approximately 300 trillion yuan ($42.3 trillion) of deposits this week, following a recent wave of stimulus policies that have further squeezed their profitability.
Economic Weakness Indicators
Economic weakness continues to surface, highlighted by a report on Monday indicating that export growth in September unexpectedly increased by only 2.4% in dollar terms from the previous year, marking the lowest level since May.
Japanese Stock Gains
In Japan, stocks were among the top gainers in Asia on Tuesday. The yen outperformed other currencies in the G-10, remaining close to 150 against the dollar, a critical psychological threshold that raises concerns about potential government intervention among investors.
Conclusion
As earnings reports roll in and geopolitical factors continue to influence markets, investors remain watchful of both economic signals and corporate performance, navigating a complex landscape of opportunities and challenges.
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