Stocks gain as focus shifts from rates to earnings

European stocks gained, with positive earnings from some of the region’s biggest companies lifting the mood after markets were roiled by a more hawkish outlook for interest rates.

The Stoxx Europe 600 index gained about 0.5%, with consumer products and services leading the advance. Sportswear maker Adidas climbed more than 6% after raising its revenue and profit outlook, while LVMH led luxury stocks higher on the back of reassuring results.

Miners outperformed as iron ore prices jumped, with Rio Tinto Plc rising as much as 3.4% after saying elevated steel exports by China will continue support demand for the raw material. Volvo AB gained after the Swedish truckmaker reported resilient margins. 

The technology sector, however, weighed on the benchmark, with ASML Holding plunging more than 6% after missing estimates for first-quarter orders. Just Eat Takeaway.com shares slumped after the company said orders slipped in the first quarter, signaling continued weak demand for food deliveries.

S&P 500 futures rose 0.3%, signaling a potential rebound on Wall Street after the gauge clocked a third day of losses on Tuesday to close near a two-month low. Nasdaq 100 contracts edged higher. Treasury yields retreated from a 2024 peak, and a gauge of the dollar snapped five days of gains that took it to a five-month high. 

Stocks have come under pressure this week as traders recalibrated bets on the timing and extent of Federal Reserve interest rate cuts. Corporate earnings will now have to do the heavy lifting for any rally, according to Barclays Plc strategists, who recommended buying the dips as resilient activity data continue to point to an economic recovery that could boost profits.

Fed Chair Jerome Powell said Tuesday it would likely take longer to have confidence that inflation is headed toward the central bank’s target. The remarks represented a shift in his message after a key measure of inflation exceeded forecasts for a third month.  

After starting the year by pricing in as many as six rate cuts in 2024, or 1.5 percentage points of easing, traders are now doubtful there will even be a half point of reductions. Market-implied expectations for Fed rate cuts — which have collapsed in the past two weeks — declined further after Powell’s comment on inflation. 

Meanwhile, tensions in the Middle East continue to simmer. Israel is weighing a response to what was the first attack on the Jewish state from Iranian soil. Saudi Arabia and the United Arab Emirates called for maximum “self-restraint” to spare the region “from the dangers of war and its dire consequences,” in an unusually frank joint statement Wednesday.

European natural gas edged higher for a fifth day. Oil dipped, with Brent crude falling below $90 a barrel, as traders wait to see how Israel would respond to Iran’s weekend attack. Gold held near a record high.

 Key events this week:

• Fed issues its Beige Book, Wednesday
• Cleveland Fed President Loretta Mester speaks, Wednesday
• Fed Governor Michelle Bowman speaks, Wednesday
• BOE Governor Andrew Bailey speaks, Wednesday
• Taiwan Semiconductor earnings, Thursday
• US Conf. Board leading index, existing home sales, initial jobless claims, Thursday
• Fed Governor Michelle Bowman speaks, Thursday
• New York Fed President John Williams speaks, Thursday
• Atlanta Fed President Raphael Bostic speaks, Thursday
• BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
• Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.5% as of 10:07 a.m. London time
• S&P 500 futures rose 0.3%
• Nasdaq 100 futures rose 0.1%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The MSCI Asia Pacific Index fell 0.2%
• The MSCI Emerging Markets Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.0638
• The Japanese yen rose 0.1% to 154.55 per dollar
• The offshore yuan rose 0.2% to 7.2526 per dollar
• The British pound rose 0.4% to $1.2472

Cryptocurrencies

• Bitcoin rose 0.7% to $63,501.66
• Ether rose 0.4% to $3,082.27

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.64%
• Germany’s 10-year yield was little changed at 2.48%
• Britain’s 10-year yield was little changed at 4.30%

Commodities

• Brent crude fell 0.5% to $89.54 a barrel
• Spot gold rose 0.4% to $2,392.98 an ounce

This story was produced with the assistance of Bloomberg Automation.