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Global Stocks Resilient amid Solid Corporate Earnings

Benchmark U.S. oil futures fell 5 cents to $45.40 a barrel in electronic trading on the New York Mercantile Exchange
By The News · 20 of July 2016 08:15:57
A currency trader walks by the screens showing the Korea Composite Stock Price Index (KOSPI), right, and the foreign exchange rates at the foreign exchange dealing room in Seoul, South Korea, No available, photo: AP/Lee Jin-man

Stock markets around the world were proving resilient on Wednesday in the face of a fairly gloomy economic outlook from the International Monetary Fund. How U.S. markets perform, however, could hinge on a raft of corporate earnings statements.

KEEPING SCORE: In Europe, Germany’s DAX was up 1.4 percent at 10,117 while the CAC-40 in France rose 1 percent to 4,372. The FTSE 100 index of leading British shares was 0.1 percent higher at 6,704. Wall Street was poised for solid gains at the open with Dow futures and the broader S&P 500 futures up 0.3 percent.

VW CHEER: One notable riser in Europe, and one which helped Germany’s DAX rise, was Volkswagen, whose shares jumped after it revealed that its first-half earnings before charges related to its diesel-emissions scandal were “significantly higher” than market forecasts. In an unexpected announcement, Volkswagen said its operating profit before special items for the first six months of the year was 7.5 billion euros ($8.25 billion) despite the economic impact of the scandal. Though Volkswagen didn’t state what market expectations it was referring to, investors appeared encouraged and Volkswagen shares spiked 5.2 percent to 134 euros.

U.S. EARNINGS: There are a number of leading U.S. companies reporting second-quarter earnings on Wednesday, including Morgan Stanley, American Express, eBay, Intel and Mattel. Solid numbers were reported from the likes of Goldman Sachs, Microsoft and Johnson & Johnson.

ANALYST TAKE: “U.S. corporate results season tends to prove a good driver each and every quarter thanks to suspiciously convenient low-balling of guidance, and last night’s Microsoft scorecard was no exception, helping boost sentiment,” said Mike van Dulken, head of research at Accendo Markets.

GLOBAL OUTLOOK: The solid earnings reports so far have helped cushion the blow from a downbeat assessment of the global economy by the IMF. On Tuesday, it said Britain’s decision to leave the European Union will reduce global economic growth this year and next. In its latest assessment, the IMF shaved its estimate for worldwide growth to 3.1 percent this year and 3.4 percent in 2017. Both estimates are 0.1 percentage points lower than the bank’s previous forecast in April.

ANALYST QUOTE: “Global stocks have enjoyed an extended period of gains which have been fueled by optimism over central banks intervening to quell the financial turmoil,” said Lukman Otunuga, research analyst at FXTM. “With fears over slowing global growth and diminishing global confidence lingering in the background, questions should be asked over the sustainability of the market rally.”

ASIA’S DAY: Asian stock markets finished mixed. Japan’s Nikkei 225 fell 0.3 percent to 16,681.89, while South Korea’s Kospi dipped 0.1 percent to 2,015.46. But Hong Kong’s Hang Seng index rose 1 percent to 21,882.48 and Australia’s S&P/ASX 200 gained 0.7 percent to 5,488.70. Stocks in mainland China ended lower.

OIL: Benchmark U.S. oil futures fell 5 cents to $45.40 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the standard for oil sold internationally, gained 8 cents to $46.74 a barrel in London.

CURRENCIES: The euro was down 0.1 percent at $1.1007 while the dollar rose 0.3 percent to 106.58 yen.