Earnings Give Stocks a Bump
By Riva Gold and Ese Erheriene
-- Asian tech under pressure following ZTE action
-- Sterling around post-Brexit high
-- Earnings from Goldman Sachs, IBM eyed
European stocks and U.S. futures inched higher Tuesday with support from corporate results, even as warnings from Western governments over a Chinese telecommunications-equipment giant put pressure on Asian markets.
The Stoxx Europe 600 edged up 0.3% morning trading after Wall Street closed higher Monday in the lowest-volume day so far this year. Stock futures pointed to continued gains in the U.S. later Tuesday, with S&P 500 and Dow Jones Industrial Average futures up 0.3%.
Among the best performers in Europe, shares of Associated British Foods rose 2.4% after the Primark owner released profit figures and left its outlook for the full year unchanged. Shares of Melrose Industries and GKN were also up over 1% each after Melrose said it intends to go ahead with the cancellation of GKN's shares in London.
The multinational-heavy FTSE 100 index was flat, however, after a bruising start to the week, as the index continued to struggle under a strengthening British pound. A stronger U.K. currency typically means corporate earnings generated overseas are worth less translated back into pounds.
Sterling was last flat at $1.4342 after settling Monday at its highest afternoon level against the dollar since the U.K. referendum in June 2016. The WSJ Dollar Index was down 0.1%.
While European shares have struggled with a stronger euro and British pound this year, U.S. companies benefited in the first quarter from a weaker dollar. Of the S&P 500 companies that reported results through Monday, 60% discussed a positive impact from foreign-exchanges rates, according to FactSet.
On Tuesday, shares of Netflix jumped in after-hours trading after reporting subscriber growth that beat its own forecast and analysts' expectations.
"Netflix is the first real gauge" of whether world-wide demand picked up in the first quarter, said JJ Kinahan, chief market strategist at TD Ameritrade.
"You really want to hear that tech stocks are doing well, and seeing demand and growth world-wide," he said.
Earnings from Goldman Sachs are also due later Tuesday and will be watched closely by market participants. U.S. banks have broadly beaten analysts' forecasts for the first quarter, but the reaction in share prices has been muted as investors entered the earnings season with high expectations.
In Asian trading, Japan's Nikkei Stock Average edged up 0.1% but Chinese equities lagged behind despite better-than-expected economic growth figures to start 2018 as parts of the smartphone supply chain came under pressure.
China's gross domestic product increased 6.8% from a year earlier in the first quarter, beating expectations slightly and equaling 2017's growth. March retail sales also rose slightly more than analysts expected, though industrial-production growth fell short.
While Chinese stock indexes rose after the data, the rebound proved to be fleeting. The Shanghai Composite Index was last down 1.4% while the startup-heavy ChiNext Price Index in Shenzhen shed 3%.
Hong Kong's Hang Seng Index gave up earlier gains to edge down 0.8% in late trading while Taiwan's Taiex Index fell 1.3%, hit by the U.S. and U.K. taking fresh action against Chinese telecom-equipment heavyweight ZTE.
The company, which has been in the crosshairs of Western governments, has been barred by the U.S. from receiving goods from American companies. ZTE is a maker of smartphones, and the prospects of the company seeing reduced business hit stocks of Asian companies in the smartphone supply chain. Taiwan Semiconductor, the island's largest company, ended down 2.3%.
In Hong Kong, component makers Sunny Optical and AAC Technologies fell 5.8% and 4.6% respectively. ZTE, which is listed in Hong Kong, didn't trade Tuesday, though Jefferies slashed its stock target by more than half.