Earnings give investors reason to cheer
Oil prices back near multi-year highs as US stocks, dollar and Bitcoin rallied
Bets that rising prices are likely to prompt central banks to raise interest rates sooner than expected lifted government bond yields, though gains were more pronounced in US than in Europe.
Stocks surged globally on Friday in their best day in five months as strong US corporate earnings reports fuelled optimism about the economy, though three-yearhigh oil prices kept inflation risks alive and lifted government bond yields.
US investment bank Goldman Sachs Group Inc was the latest on Wall Street to trounce market expectations when it reported a 66 per cent surge in third-quarter profit, thanks to a record wave of investment banking activity.
Though some analysts warned investors against complacency so early in the earnings season, especially given current constraints in the supply chain, US stocks joined Friday’s rally in global equities.
The Dow Jones Industrial Average jumped 1.1 per cent in its best weekly performance since June 25. The S&P 500 climbed 0.75 per cent to notch its best week in 2-1/2 months, and the Nasdaq Composite added 0.5 per cent.
The pan-European STOXX 600 index rose 0.74 per cent and MSCI’s gauge of stocks across the globe gained 0.86 per cent, the biggest daily rise since May 14.
“We are clearly off to a good start of the third-quarter earnings season, but have miles to go before we sleep,” said Arthur Hogan, chief market
strategist at National Securities Corp. Hogan noted that only 35 of the S&P 500 companies have reported their earnings.
Unperturbed by news of a fatal stabbing of a British lawmaker on Friday, Britain’s FTSE 100 climbed 0.37 per cent to hit a near 20-month high. The UK blue-chip index has now recovered all ground lost since the coronavirus pandemic began in March last year.
Inflation takes back seat
Concerns that soaring oil prices could drag on businesses and the economy also took a back seat for now.
Forecasts of an oil supply deficit over the next few months as demand rises on the back of relaxed travel restrictions drove oil prices to a three-year high of above $85 a barrel.
US crude recently jumped 1.13 per cent to $82.23 per barrel and Brent added 0.83 per cent to $84.70, after hitting a high of $85.10.
Bets that rising prices are likely to prompt central banks to raise interest rates sooner than expected lifted government bond yields, though gains were more pronounced in the United States than in Europe.
The yield on two-year US. Treasuries, which reflect shortterm rate expectations, zoomed up to a near 19-month-high 0.3949 per cent, from Thursday’s 0.354 per cent. Benchmark 10-year Treasury yield also rose to 1.5738 per cent, from Thursday’s 1.519 per cent.