GLOBAL MARKETS-Shares eye five-month peak as earnings season starts

GLOBAL MARKETS-Shares eye five-month peak as earnings season starts

Reuters  | Jul 13, 2020 19:40

GLOBAL MARKETS-Shares eye five-month peak as earnings season starts

* MSCI AC World index closing in on Feb. 26 highs
* Markets brace for U.S. earnings season
* European stocks, euro rise ahead of ECB, EU Summit this
* Investors upbeat even as coronavirus cases surge in U.S.
* Graphic: World FX rates in 2020

By Thyagaraju Adinarayan
LONDON, July 13 (Reuters) - World shares were just shy of a
five-month peak and the dollar dipped on Monday as investors
watch second-quarter earnings for signs that corporate profits
have hit their lowest and are starting to recover as coronavirus
lockdowns ease.
Wall Street banks JPMorgan, Citigroup and Wells Fargo are
set to kick off on Tuesday a U.S. results season that Refinitiv
data suggests will show the second-biggest quarterly drop in
corporate earnings since 1968. "Equity indices are clearly trying to look through into Q3
and beyond, but with the U.S. struggling to shake off the
coronavirus phase one, this should be factored into equity risk
premia," said Raymond James European strategist Chris Bailey.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 0.8% as Chinese stocks jumped 2.1% on
Monday .CSI300 . Japan's Nikkei .N225 gained 2.2% and South
Korea .KS11 1.7%.
The optimism carried into Europe, where stocks .STOXX rose
1% even after the United States on Friday slapped additional
duties of 25% on French luxury goods valued at $1.3 billion, in
a tit-for-tat response to France's digital services tax.
MSCI's All-Country World Index .MIWD00000PUS was one point
away from hitting Feb. 26 highs. E-Mini futures for the S&P 500
ESc1 ticked 0.7% higher despite record new cases of COVID-19
in the United States over the weekend, a divergence that shows
no sign of stopping.
"Ongoing grim U.S. COVID-19 infection news continues to be
summarily ignored in favour of ongoing optimism regarding the
timeline for the discovery and rapid roll-out of an effective
vaccine and/or more policy support for asset prices and the U.S.
economy," said Ray Attrill, head of FX strategy at NAB.
The risk-on rally saw the U.S. dollar dip 0.1% =USD
against a basket of major currencies after three straight weeks
of losses.
The euro, meanwhile, rose 0.2% to $1.132 to maintain its
slow uptrend since late last month. Looming large for the common
currency was a planned EU summit on July 17-18, where leaders
need to bridge gaps on long-term budget and economic stimulus
plans. FRX/
"If an agreement weren't to be reached there, then they
still expect one within weeks. It's worth remembering that there
are number of complex issues to be worked out," Deutsche Bank
strategist Jim Reid said.
Safe-haven German yields rose slightly, and Italy's 10-year
yield hit the highest level in over a week at 1.33% in early
trade as investors bagged profits after the recent rush to
safety cooled. IT10YT=RR
Yields on U.S. 10-year notes US10YT=RR came close to
record lows last week at 0.569% and were last at 0.63%.
Super-low rates have in turn been a boon for non-yielding
gold which hit a near nine-year high after five straight weeks
of gains. The metal was last at $1,807 an ounce XAU= , just off
a $1,817.17 top.
The hunt for yield has tended to benefit emerging market
currencies and those leveraged to commodities such as the
Australian dollar, while weighing on the U.S. dollar.
Oil prices eased in early trade, although that followed a
sharp rise on Friday when the International Energy Agency (IEA)
bumped up its 2020 demand forecast. O/R
Brent crude LCOc1 futures fell 1.5% to $42.61 a barrel,
while U.S. crude CLc1 lost 76 cents to $39.79.

Global earnings 2020 forecast

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