European stocks gain on positive earnings; lira rebounds
Positive earnings set the tone for equity markets while the dollar traded at a sevenweek high as speculation grew the U.S. will raise interest rates this year.
Technology companies and carmakers led the Stoxx Europe 600 Index higher after earnings from software maker SAP SE and Volkswagen AG beat analysts' estimates. The dollar rose for a second day against the euro.
The lira rebounded from near a record low as the country's president vowed to make an "important" announcement in the wake of a failed coup attempt. Gold headed for the lowest close this month.
Corporate earnings are helping sustain a run that's added more than $4.5 trillion to the value of equities worldwide in three weeks. That along with better-than-estimated U.S. economic data is providing comfort to investors even as concern mounts that the U.K.'s vote to leave the European Union will damp global growth. Morgan Stanley and Intel Corp. are among U.S. companies announcing results on Wednesday, after Microsoft Corp.'s sales and profit surpassed forecasts. "There are some positive surprises like SAP pushing stocks upwards," said Ralf Zimmermann, an equity strategist at Bankhaus Lampe in Dusseldorf, Germany. "But overall, I do not expect the earnings season to be strong enough to really trigger a lasting rally. Expectations are too high, and there will be ongoing downwards revisions of longer-term growth expectations."
The Stoxx 600 added 0.9 percent at 6:18 a.m. in New York, with the volume of shares changing hands 38 percent lower than the 30-day average. S&P 500 Index futures rose 0.4 percent after the measure slipped on Tuesday from an all-time high.
Europe's benchmark gauge has alternated between gains and losses each day since last week, after a rebound of about 9 percent following the slump after the Brexit vote on June 23. Investors watching corporate earnings results are also waiting for Thursday's ECB meeting for clues about President Mario Draghi's plans. Economists in a Bloomberg survey predict rates will remain unchanged this week. SAP climbed 4.2 percent and VW surged as much as 6.3 percent. Lonza Group AG jumped 6.4 percent as the Swiss developer of drug ingredients raised its annual guidance. Nordea Bank AB added 2 percent as its net fee and commission income topped predictions.
Anglo American Plc dragged miners lower, falling 6.5 percent, after cutting its copper production target. Man Group Plc lost 4.3 percent as its Chief Executive Officer Emmanuel Roman was tapped to be CEO at Pacific Investment Management Co. In the U.S., Microsoft climbed 4 percent in early New York trading. The earnings seasons so far has delivered more positive surprises than negative ones. Analysts see profit at S&P 500 companies falling 5.8 percent in the second quarter, which would mark a fifth consecutive slide, the longest streak since 2009.
The lira was 0.4 percent stronger at 3.0294 per dollar, after earlier sinking as much as 0.7 percent to 3.0623, within 0.5 percent of the all-time low reached in September. The currency is down 4.9 percent, the worst performance among major currencies, since a failed coup attempt on Friday as authorities purged state institutions, the central bank lowered interest rates and and Moody's Investors Service said it may lower the country's credit rating to junk. President Recep Tayyip Erdogan is due to make an announcement on Wednesday that an official said would boost social cohesion and Turkey's democratic credentials. The Bloomberg Dollar Spot Index climbed as much as 0.2 percent to its strongest level since June 1, before being little changed. It advanced 0.5 percent on Tuesday as a report showed new-home construction in the U.S. rose more than economists forecast in June.
A Citigroup gauge that tracks the degree to which American data are exceeding projections is at an 18-month high and futures put the chance of a Federal Reserve rate increase this year at 43 percent, up from 9 percent at the end of June.