Global stocks flat ahead of US earnings; bond yields firm up

Crude oil prices drop more than 1.5 pct

LONDON, April 16, (Agencies): Oil prices fell sharply and government bond yields rose on Monday on the view that this weekend’s US-led missile strikes on Syria were unlikely to mark the start of a broader conflict.

European shares eased, however, adding to a mixed picture from Asian stock markets and suggesting that a degree of caution prevails.

While last week’s bid for investment safety in top-rated government bonds unwound, other traditional safe-haven bets held firmer. Gold prices were little changed, while Japan’s yen and the Swiss franc were higher than levels seen late on Friday.

European and US government bond yields, which move inversely to prices, rose across the board. That was partly as attention turned to what is expected to be a robust first-quarter US corporate earnings season, which begins in earnest this week.

Oil prices, meanwhile, dropped sharply. Brent crude fell more than 1 percent to $71.78 a barrel, with a rise in US drilling for new production also dragging on prices.

MSCI’s world equity index, which tracks shares in 47 countries, was flat on the day and a benchmark pan-European stock index was marginally lower.

US stock futures were pointing to a higher opening on Wall Street, with Dow and S&P Futures up 0.6 percent each and Nasdaq futures up 0.7 percent.

The dollar failed to hold its early gains on the yen and eased to 107.27, though that was still up on last week’s low around 106.62.

Japan’s Nikkei rose 0.3 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 percent as Chinese bluechips skidded 1.7 percent.

The euro was a higher at $1.2368, while the dollar index eased to 89.540.

US

US stock index futures rose on Monday as investors bet the weekend’s US-led missile attack on Syria would not escalate into a broader conflict, while turning their focus to the earnings season.

Shares of JPMorgan, Wells Fargo and Citigroup, all of which reported on Friday, were also higher.

Analysts are expecting the S&P 500 companies to record an 18.6 percent rise in profit, their strongest earnings growth in seven years, according to Thomson Reuters I/B/E/S.

However, many traders say that reactions to results could be muted as market participants have already priced in gains from corporate tax cuts, reflected in the stock market’s strong rally in 2017 and early 2018.

At 8:44 am ET, Dow e-minis were up 158 points, or 0.65 percent. S&P 500 e-minis rose 16.25 points, or 0.61 percent and Nasdaq 100 eminis gained 41.75 points, or 0.63 percent.

Waning fears of a broader conflict in Syria pushed short-dated US Treasury yields to their highest level in almost a decade, while crude oil prices eased due to a rise in US drilling activity.

“We’re seeing a little bit of an uptick in yields and pullback in oil, and those are likely to constrain any strong reaction to earnings and macro news,” said Cardillo.

Data on Monday showed US retail sales increased more than expected in March, rising after three straight monthly declines, as households boosted purchases of motor vehicles and other big-ticket items.

Shares of Netflix, which is expected to report results after market close on Monday, rose 1.44 percent.

Europe

Russia holding back on any military riposte helped lift Wall Street, as did strong retail sales, but European equities closed lower as the region’s key currencies strengthened against the dollar.

“The limited and targeted strikes in Syria that provoked no serious response from Russia were a relief to markets that were pricing in escalation,” said Jasper Lawler, head of research at LCG.

The commodities-heavy FTSE100 in London slipped as oil prices slid, and shares in BP and Shell both fell.

Also weighing on the FTSE 100 index was a strong pound which hit the share prices of multinationals earning large amounts in other currencies.

British advertising and marketing group WPP topped the FTSE fallers after chief executive Martin Sorrell resigned over the weekend.

Sorrell’s departure came 10 days after WPP launched an independent probe into allegations of his personal misconduct through the misuse of company assets.

The company, widely regarded as a bellwether for the global advertising industry, was around three percent lower in late trading, having earlier fallen by more than five per cent.

“WPP has been losing ground in the advertising world recently, as traditional advertising is losing out to online and social media marketing,” said CMC Markets analyst David Madden.

“Sir Martin was an integral part of WPP, and some market confidence has been lost now that he is no longer at the helm.” n Key figures around 1540 GMT: London — FTSE 100: Down 0.9 per cent at 7,198.20 points (close)

Frankfurt — DAX 30: Down 0.4 per cent at 12,391.41 (close)

Paris — CAC 40: Down 0.04 per cent at 5,312.96 (close)

EURO STOXX 50: Down 0.2 per cent at 3,441.04

Asia

Most Asian markets fell on Monday after a US-led strike on Syrian targets fuelled fresh concerns over the tinderbox Middle East, though analysts said investors were hopeful the crisis would not escalate.

Hong Kong fell 1.6 percent, while Shanghai had slipped 1.5 percent at the close, with traders there awaiting the release Tuesday of first-quarter Chinese growth data.

Property firms in Hong Kong took a hit on fears of an end to the era of low interest rates as the city’s de facto central bank was forced to support the local dollar, which is at 7.85 to the greenback, the lowest end of its band with the US unit.

The Hong Kong Monetary Authority has spent about US$1.7 billion boosting the currency, which has been hit by a flow of cash out of the city to the United States in search of higher interest rates.

Singapore fell 0.2 percent, while Wellington and Taipei also declined.

However, Tokyo ended in positive territory, up 0.3 percent, while Sydney edged up 0.2 percent and Seoul 0.1 percent.

“The markets are taking the surgical strike at the heart of Syria’s chemical weapon programme in their stride as traders had priced in this outcome with a high degree of probability,” Stephen Innes, head of Asia-Pacific trade at OANDA, said in a note. Key figures around 0810 GMT Tokyo — Nikkei 225: Up 0.3 percent at 21,835.53 (close)

Hong Kong — Hang Seng: Down 1.6 percent at 30,315.59 (close)

Shanghai — Composite: Down 1.5 percent at 3,110.65 (close)

Dollar/yen: Down at 107.30 yen

from 107.35

Oil

Oil eased on Monday after US drilling activity rose and fears waned about escalating tensions in the Middle East following air strikes on Syria over the weekend.

The United States, France and Britain launched 105 missiles on Saturday, targeting what they said were three chemical weapons facilities in Syria in retaliation for a suspected poison gas attack on April 7.

The oil price had risen nearly 10 percent in the run-up to the strikes, as investors bulked up on assets, such as gold or US Treasuries, that can shield against geopolitical risks.

By 1140 GMT on Monday, Brent crude oil futures were down 83 cents at $71.75 a barrel, while US crude futures were down 78 cents at $66.61 a barrel.

Although Syria itself is not a significant oil producer, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

“Investors continued to worry about the impact of a wider conflict in the Middle East,” ANZ bank said.

Fund managers hold more Brent futures and options than at any time since records began in 2011, according to data from the InterContinental Exchange.

Investors have added to their bullish positions in Brent, which now equal nearly 640 million barrels of oil, in nine out of the last 10 months, in part thanks to the premium of the front-month futures contract over those for delivery at a later date, known as “backwardation”.

Gold

Gold retreated on Monday, surrendering gains made in earlier trade on the back on this weekend’s air strikes on Syria, as financial markets wagered the latest US-led intervention would not escalate into a wider conflict.

A softer tone to the dollar kept the metal firmly underpinned, however. Prices have trended sideways since January, buoyed by geopolitical worries but capped by expectations for further US interest rate hikes and strong technical resistance at $1,360-$1,365 an ounce — their January, February and April highs.

Spot gold was at $1,342.62 an ounce at 1130 GMT, down 0.2 percent and off an earlier peak of $1,348.69. US gold futures were 0.2 percent lower at $1,345.60 an ounce.