Stocks gear up for Big Tech earnings; yen touches multi-year lows

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 20, 2024. REUTERS/Brendan McDermid/File Photo

By Chris Prentice and Amanda Cooper

NEW YORK/LONDON (Reuters) – Global shares rose on Tuesday, driven by a recovery on Wall Street, where investors are focused on earnings reports from the U.S. megacaps, and the yen tumbled to multi-year lows against the dollar and the euro.

Treasury yields dipped after data showed that U.S. business activity cooled to a four-month low.

Easing concerns about the threat of a major re-escalation of tension in the Middle East and a focus on company earnings brought renewed risk appetite from investors.

MSCI’s gauge of stocks across the globe rose 9.47 points, or 1.26%, to 758.76 by 2:09 p.m. ET (1809 GMT), further pulling away from Friday’s two-month low.

On Wall Street, the Dow Jones Industrial Average rose 255.14 points, or 0.67%, to 38,495.12, the S&P 500 gained 63.23 points, or 1.26%, to 5,073.83 and the Nasdaq Composite gained 266.57 points, or 1.73%, to 15,717.87.

The FTSE 100 hit a record high, as the STOXX 600 rose 1.09% on gains in the technology sector.

Adding to the optimism was a series of surveys of business activity that showed Germany returned to growth in early April after months of contraction, while activity in the broader euro zone expanded at its fastest clip in nearly a year.

“We are turning a bit more positive on risk sentiment. There still remains a fair bit of uncertainty around geopolitics and rising U.S. real yields, but we are more positive than we were a week ago,” Mohit Kumar, a strategist at Jefferies, said.

The dollar retreated from its recent highs, but was comfortably supported by the view among investors that no U.S. rate cuts will be forthcoming any time soon from the Federal Reserve and by the climb this month in Treasury yields to their highest since November.

On Wall Street, big tech shares outperformed ahead of quarterly results this week.

“Odds are the earnings reports that we see over the next few weeks will be positive, but obviously there’s still issues around what the Fed will do next,” said Shane Oliver, chief economist at AMP, noting that security concerns also remained. “It’s too early to say that problems in the Middle East have gone away.”

FILE PHOTO: A passerby walks past an electric monitor displaying recent movements of various stock prices outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo

“There are lots of things that could cause volatility between now and the end of the year. And so we’re probably coming to a more constrained, more volatile period for markets.”

Aside from Tesla, Meta Platforms, Alphabet and Microsoft will release earnings this week.

MEGA WOBBLE?

UBS on Monday downgraded its rating on the mega-cap companies, warning that profit growth momentum of the so-called Big Six technology stocks could “collapse” over the next few quarters.

U.S. business activity, quarterly economic growth and a measure of monthly inflation top the macro data bill this week.

Traders now expect the first Fed rate cut to come most likely in September and see just 40 basis points’ worth of cuts this year, compared with expectations for 150 bps of cuts at the beginning of the year.

The yield on benchmark U.S. 10-year notes fell 3.5 basis points to 4.588%, from 4.623% late on Monday.

The 30-year bond yield fell 1.5 basis points to 4.7086% from 4.724% late on Monday.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 4.4 basis points to 4.9266%, from 4.971% late on Monday.

The European Central Bank is expected to cut rates in June and this divergence with the Fed is weighing on the euro. It was last up 0.14% at $1.0667, not far off last week’s five-month low of $1.0601.

The yen recovered after striking another 34-year low against the dollar.

Japan’s finance minister Shunichi Suzuki said last week’s trilateral meeting with his U.S. and South Korean counterparts laid the groundwork for Tokyo to take appropriate action in the foreign exchange market.

This is the clearest warning yet from Japanese monetary authorities that tolerance for the slide in the currency is wearing thin and official intervention to prop it up is likely.

In commodities, spot gold reversed earlier losses, up 0.08% to $2,328.14 an ounce. U.S. gold futures fell 0.3% to $2,325.30 an ounce.

Oil prices were up as investors continued to assess the situation in the Middle East. U.S. crude gained 1.76% to $83.34 a barrel and Brent rose to $88.39 per barrel, up 1.6% on the day.

(Additional reporting by Stella Qiu in Sydney; Editing by Ros Russell, Tomasz Janowski and Emelia Sithole-Matarise)