April 21 – A look at the day ahead from Danilo Masoni.
Will earnings season be a “sell the news” event?
It’s early to say but signs are there that strong first-quarter results may not be enough to stop investors from taking profit on European and U.S. equity markets at record peaks.
Europe’s STOXX 600 saw its worst day this year on Tuesday, falling 1.9%, even as Europe Inc kicked off a season that’s expected to deliver 61% profit growth, its biggest surge in over 9 years.
Wall Street too fell overnight amid second thoughts on U.S. banks’ apparently stellar earnings last week. And dip buyers are not showing up in mass this morning.
Germany’s DAX futures were last up 0.4% while S&P derivatives were flat and Asian stock markets fell. An India-led rise in COVID-19 cases and equity valuation metrics well above long-term averages help explain the short-term caution.
Meantime Q1 soundings continue to support hopes the world will swiftly recover from the COVID-19 downturn: chip firm ASML upped its full-year forecast, earnings at telco supplier Ericsson beat forecasts, paint maker Akzo’s profit jumped 43%, and carmaker Hyundai is set to report a nearly three-fold profit surge.
Soccer stocks are in focus as Europe’s breakaway Super League project was left in tatters after all English clubs quit, although Italy’s Juventus said the project was going ahead.
Juventus shares fell 3.9% on German platform Lang & Schwarz. Manchester United shares fell 6% in New York trade overnight.
Elsewhere, oil prices fell from one-month highs and gold eyed 7-week highs as risk aversion returned. U.S. 10-year bond yields were near 6-week closing lows ahead of an auction of 20-year Treasuries. The Fed is committed to limiting any overshoot in inflation, Fed Chair Jerome Powell was reported saying.
Key developments that should provide more direction to markets on Wednesday:
* UK inflation rises to 0.7% in March vs 0.4% in Feb.
* BOE Governor Andrew Bailey and Deputy governor Dave Ramsden to speak
* Bank of Canada interest rate announcement – 1400 GMT
* Netflix subscriber growth slows after pandemic boom, shares fall 11%
* Bain Capital weighing bid to take Toshiba private -sources
* U.S. 20-year Treasury auction
* U.S. corporates: Nasdaq, Halliburton, Whirlpool, Verizon
* European corporates: Accor, Deutsche Boerse, Carrefour, Heineken, Akso Nobel, Roche, Svenska Handelsbanken
Reporting by Danilo Masoni; Editing by Dhara Ranasinghe
