Global Stocks Gain as Fed Officials Signal Confidence
By Avantika Chilkoti
Global stocks opened higher on Tuesday, reversing declines from the beginning of the week a day after Fed officials in separate speeches signaled confidence in the U.S. economy.
In Europe, the Stoxx Europe 600 was up 0.2% in morning trading. In Asia, the Shanghai Stock Exchange was up 2.4%, Hong Kong's Hang Seng Index rallied 0.9% and Japan's Nikkei gained 0.2% on hopes for a resurgence in Chinese growth.
Futures pointed to small gains when U.S. indexes open with Dow Jones Industrial Average futures up 0.3% and S&P 500 futures up 0.2%.
Investors are watching closely as large U.S. companies post quarterly earnings this week, which are generally expected to disappoint compared with the same period last year. Many analysts are watching for weaker profits as confirmation of concerns that global growth is set to falter in the coming months.
"Given we have already seen prices bounce so significantly this year at the same time that earnings expectations have been coming down, valuations are no longer clearly cheap," said Karen Ward, chief market strategist for Europe, the Middle East and Africa at J.P. Morgan Asset Management. "Therefore, for prices to continue to move higher, I do think we need to see earnings bottom and start to begin to move back up."
After a rapid pickup in global markets at the beginning of the year, analysts have grown wary about the prospects for growth in the U.S. as trade negotiations with China drag on and the effects of President Trump's tax reforms begin to wear off.
On Monday, officials from the U.S. Federal Reserve indicated they could be willing to leave rates on hold till later this year and sounded a note of optimism on growth prospects in the world's largest economy.
Later on Tuesday, the U.S. Federal Reserve will post the latest industrial production data, which will be followed by trade data from the U.S. Commerce Department on Wednesday.
The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was broadly flat.
The 10-year U.S. Treasury ticked up to 2.557% from 2.553% on Monday. Yields move inversely to prices.
Trading has been thin this week as U.S. indexes neared record highs with the Nasdaq Composite clocking the lowest volumes since Christmas on Monday.
Elsewhere in commodities, global benchmark Brent crude oil down 0.4% at $70.91 a barrel on expectations of rising output, while gold dropped 0.2%.
"Precious metals are facing headwind from stock markets--the S&P 500 is nearing its record high again and indices in Asia are getting off to a positive start to the new week--and from rising bond yields, which for example make gold less attractive as an alternative investment," Commerzbank analysts said in a recent note to clients.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com