The Tuesday Market Minute
- Global stocks rebound as investors shift focus to earnings over trade war rhetoric.
- China shares book solid gains as trade tensions thaw, government support boosts sentiment.
- European stocks edge higher even as weaker industrial output from Germany highlights trade war impact.
- Oil prices extend gains following renewed U.S. sanctions on Iran
- S&P 500 now 0.8% from its all-time high of 2,872.87.
- Wall Street futures firmly in the green ahead of earnings from Disney and Discovery Communications.
Global stocks rebounded modestly Tuesday, helping pull Wall Street futures into positive territory, as investors shifted focus from trade war rhetoric to corporate fundamentals as U.S. earnings continue to impress and the S&P 500 edges closer to the all-time high it reached in January.
An overnight thaw in tensions between the U.S. and China helped markets in Asia notch solid gains, as stocks in China rebounded with the biggest single-day gain in two years as investors snapped-up shares beaten down shares on exchanges in Hong Kong and Shanghai amid speculation that government support for the broader economy would support stocks in the second half of the year.
China's Shanghai Composite was marked 2.74% higher at 2,779.20 points by the close of trading while the bluechip CSI 300 was seen 2.92% higher at 3,368.85 points. The Hang Seng index in Hong Kong was also notably higher by the close of trading, rising 1.51% to 28,235.39 points.
A modest retreat for the U.S. dollar, which fell against a basket of six global currencies as risk appetite around the region improved, also helped lift the MSCI Asia ex-Japan index 0.66% higher into the close of the trading session. Japan's Nikkei 225, meanwhile, closed out the session with a solid 0.69% gain to end the day at 22,662.74 points.
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European stocks were also firmer at the opening bell, with the region-wide Stoxx 600 rising 0.26% in early Frankfurt trading, thanks to solid gains for basic resource and energy stocks, even as investors watched German's June industrial output fall by a more-than-expected 0.9% over the month of June.
Commerzbank AG (CRZBY) were an early mover of note, falling more than 2.5% to the bottom of the DAX performance index after Germany's second-biggest bank posted better-than-expected second quarter profits of €272 million but said costs would rise over the second half of the year while corporate client revenues were expected to decline.
Early indications from U.S. equity futures suggest the improved market sentiment will help lift Wall Street higher at the opening bell, with contracts tied to the Dow Jones Industrial Average I:DJI forecasting a 90-point gain while those linked to the S&P 500 undefined indicating a 7.6 point advance for the broader benchmark as it nears the all-time high it reached on January 26.
With around 71% of the S&P 500 having issued quarterly reports so far this season, earnings are expected to grow by 23.5% over the three months ending in June, a figure that would top the gains recorded over the first quarter and market the best reporting period in eight years. Around 79.2% of reporting companies have beaten their consensus earnings estimates, according to Thomson Reuters data, well ahead of the 72% average for the past four quarters.
Stock buybacks, too, are on the increase, with $135.2 billion announced so far during this reporting period and companies on pace to match the $189.1 billion first quarter record.
Today's earnings calendar, however, is relatively quiet, with only second quarter figures from Walt Disney Co. (DIS) - Get Walt Disney Company Report and Discovery Communications (DISCA) - Get Discovery, Inc. Class A Report expected to garner headline attention.
Benchmark 10-year U.S. Treasury yields were little-changed at 2.94% amid one of the busiest weeks for new bond sales, which will bring $239 billion in new debt to the market as the government continues to fund its late 2017 tax cuts, a decision that the Congressional Budget Office says will take the country's budget deficit past $1 trillion by the year 2020.
Global oil prices extended gains for a second consecutive session as investors reacted to the detailing of U.S. sanctions on Iran and adjusted for the potential that its 3 million barrels of daily crude output may not find its way to international customers later this year.
Brent crude contracts for September delivery, the global benchmark, were seen 34 cents higher from their Monday close in New York and changing hands at $74.12 in London trading, while WTI contracts for the same month were marked 20 cents higher at $69.22 per barrel.