While you were sleeping: Earnings boost sentiment

Tuesday 19th July 2016

Better-than-expected earnings such as from Bank of America as well as a US$32 billion tech deal helped bolster equities on both sides of the Atlantic.

Shares of Bank of America rallied, up 3.9 percent as of 2.37pm in New York, after the bank reported better-than-expected quarterly results.

"Bank of America's 2Q results, while noisy, reflected a number of items that surprised positively," Nomura analyst Steven Chubak told Reuters.

As low interest rates weigh on earnings, the focus is on keeping costs in check.

"The question is, can we grow earnings without rates improving?" CEO Brian Moynihan said on a conference call, according to media reports. "We believe we surely can."

Wall Street moved higher. In 2.36pm trading in New York, the Dow Jones Industrial Average rose 0.1 percent, while the Nasdaq Composite Index gained 0.6 percent. In 2.21pm trading, the Standard & Poor’s 500 Index moved 0.2 percent higher.

“The focus for the market is on earnings, and more importantly guidance, focusing on the impact of the economy, elections, and how the dollar is influencing business conditions,” Kevin Kelly, the chief investment officer at Recon Capital Partners in New York, told Bloomberg.

The Nasdaq received a boost from acquisition news. Share of ARM Holdings soared, up 40.9 percent in London, after Japan’s SoftBank agreed to buy the UK chip designer for US$32 billion. The deal is the biggest ever Japanese acquisition in Europe, according to Bloomberg.

The Dow rose, as gains in shares of Home Depot and those of DuPont, recently each up 1.1 percent, outweighed declines in shares of Caterpillar and those of Merck, last down 1.3 percent and 1 percent respectively.

US Treasuries fell, pushing yields on the 10-year note five basis points higher to 1.60 percent, amid renewed optimism about the US economy.

In Europe the Stoxx 600 Index finished the day with an increase of 0.2 percent from the previous close, bolstered by the ARM Holdings deal. The UK’s FTSE 100 index added 0.4 percent. Even so, France’s CAC 40 index fell 0.3 percent while Germany’s DAX index closed 0.04 percent weaker.

Investors shrugged off the unsuccessful attempt at a military coup in Turkey on Friday, and are waiting for comments from European Central Bank President Mario Draghi following a policy meeting on Thursday about the outlook for the economy and additional stimulus.

“The fact that the coup has failed in Turkey is helping European stocks today, adding to optimism on expectations that the ECB might announce some further easing or call for governments to step up fiscal measures to prop up the economy this week,” Pierre Mouton, who helps manage about US$9 billion at Notz, Stucki & Cie in Geneva, told Bloomberg.

In Turkey, the Borsa Istanbul 100 Index plunged 7.1 percent.

BusinessDesk.co.nz

Comments from our readers

No comments yet