World shares ride earnings to fresh high, dollar steady
Asian shares advanced to one-week highs on Wednesday, led largely by strong U.S. corporate earnings, although the mood remained cautious as the rapidly spreading Delta variant of the coronavirus clouds the global economic outlook.
LONDON: Global shares rode earnings to a record high on Wednesday, while the dollar and Treasury yields languished in the wait for U.S. employment data to provide clues to the pace of monetary tightening in the world's biggest economy.
Strong corporate profits have eased concerns over the COVID-19 pandemic, as vaccine roll-outs continue apace in developed markets, despite a resurgence of cases in Asian countries including China.
While that has helped buoy equities, inflationary pressures and a growing belief the U.S. Federal Reserve may soon signal its intention to trim support to the economy continue to cause a tussle with the bond market over mid-term direction.
"Macro data is coming at high expansionary levels but currently all the market is seeing is peak data. It wants to know what's going to be the glide path over the next 12 months. Those concerns are playing out in the bond market," said Grace Peters, EMEA head of investment strategy at J.P. Morgan Private Bank.
"When it comes to the equity markets, you have more balance, as lower yields support equities, especially the growth part of the equity market. At the same time, there is strong bottom-up evidence that life is good for corporates."
The MSCI World index, a broad gauge of equity markets, was last up 0.2per cent, tracking overnight gains in Asia, where the equivalent index, excluding Japan rose 1per cent.
Across Europe, the STOXX Europe 600 and FTSE 100 were up 0.4per cent-0.6per cent, with the latter supported by strong results from housebuilder Taylor Wimpey and insurer Legal and General.
U.S. stock futures pointed to a quiet open on Wall Street, hovering either side of flat.
Close to 90per cent of companies listed on the S&P500 have reported positive earnings surprises for the second quarter, National Australia Bank (NAB) economist Tapas Strickland said.
"Aside from (the) healthy earnings outlook, we also see equities being supported by continued monetary stimulus from the Federal Reserve and the attractiveness of stocks relative to low bond yields," said Mark Haefele, Chief Investment Officer, UBS Global Wealth Management in a note.
Investors expect volatility to increase in August as more companies report earnings and the market hears from Federal Reserve officials in coming weeks.
While all eyes will be on the latest U.S. non-farm payroll numbers on Friday - the last before U.S. central bankers convene at Jackson Hole to discuss policy - markets are also set to take a hint from Wednesday's U.S. ADP employment survey.
Ahead of the data, the U.S. dollar was up 0.1per cent against a basket of currencies while benchmark Treasury yields were up 1 basis point at 1.182per cent.
Elsewhere in currencies, the pound was up 0.2per cent against the dollar while the euro was flat. Bitcoin was down 0.8per cent at just under US$38,000, with ethereum down 0.1per cent, paring early losses ahead of a network upgrade.
Euro zone government bond yields hovered near recent lows, with the German 10-year yield at -0.489per cent, little moved by July euro zone purchasing managers index survey data that came in slightly worse than expected.
In commodities, Brent futures gave up early gains to last trade 0.2per cent lower at US$72.30 a barrel, while U.S. crude was down 0.4per cent at US$70.26 a barrel.
Spot gold was up 0.2per cent at US$1,812.9 an ounce.
(Additional reporting by Sujata Rao and Swati Pandey; Editing by Sam Holmes, Barbara Lewis and Emelia Sithole-Matarise)