European Shares Advance on Strong Earnings, Confident Fed -- 2nd Update

By Riva Gold and Ese Erheriene Features Dow Jones Newswires

European stocks and Wall Street futures climbed Thursday on upbeat corporate results and signs of a firming economy, brushing off a steep drop in commodity prices.

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Futures pointed to a 0.3% opening gain for the S&P 500 and Dow Jones Industrial Average, as investors reflected on the Federal Reserve's vote of confidence in the economy and parsed a fresh set of earnings reports.

The U.S. central bank left interest rates unchanged on Wednesday but said it expected the economy to rebound from a soft first quarter, signaling it is likely to continue gradually raising rates this year if the data hold up.

Upbeat news from Europe also lifted European stocks despite a sluggish lead from Asian markets. The Euro Stoxx 50 index of blue-chip eurozone companies was up 0.8% midday after a measure of activity in the eurozone's manufacturing and services sectors rose to a six-year high, retail sales figures improved and a gauge of Italy's services sector reached its highest in a decade.

"For the first time since the European sovereign debt crisis broke out, we have a synchronized economic upswing in almost all continental European economies," said Frank Engels, head of multi-asset portfolios at Union Investment.

Germany's DAX index was up 0.7%, on track for another record close, while stocks in Italy jumped 1.5%. The euro climbed 0.4% against the dollar to $1.0946, not far off its best level this year, while the British pound rose 0.2% to $1.2896 after the U.K.'s services index for April beat forecasts.

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Earnings reports also pushed up the oil and gas and banking sectors in Europe, sending the wider Stoxx Europe 600 up 0.4%. Shares of Royal Dutch Shell PLC climbed 2.5% after the energy giant said first-quarter profit more than quadrupled from a year ago, while HSBC Holdings PLC rose 4.1% after results.

Government bonds remained under pressure meanwhile as investors solidified expectations for an interest rate rise in June. Yields on 10-year Treasurys rose to 2.344% Thursday from 2.309%. Yields move inversely to prices.

The WSJ Dollar Index, which tracks the dollar against a basket of currencies, shed 0.1% after rising 0.5% on Wednesday in the aftermath of the Fed meeting.

The gap between French and German bonds narrowed to around its lowest since November on Thursday following a live head-to-head debate between French presidential candidates Emmanuel Macron and Marine Le Pen late Wednesday, which analysts said kept Mr. Macron in the lead.

Investors had sold French debt and bought German debt earlier in the year to protect against the chance that France could elect a euroskeptic candidate and ultimately leave the currency union.

"More and more [investors] believe there is almost no risk entailed in the second round of the French election," said Mr. Engels, pointing to the accuracy of the polls in the first round of the vote.

Stock-market gains Thursday came despite a steep drop in commodities prices that weighed on mining shares, with Brent crude oil last down 1.2% at $50.19 a barrel and metals prices lower across the board.

A global fall in metals prices gained speed in Asian trading Thursday amid concerns about Chinese demand for commodities such as steel and iron. China's iron-ore futures opened at the 8% limit drop, while copper futures in London were last down 0.4% and gold fell 1.1% to $1,235 an ounce.

A Caixin reading on China's service-sector activity hit its lowest level in nearly a year for April on Thursday, adding to concerns about the country's economic health, though it remained in expansion territory.

"China has been gradually but appreciably tightening credit," said Tina Byles Williams, chief investment officer at FIS Group, noting that is slowly showing up in economic data and metal prices.

"I don't see catastrophe, but I do think there's a lot of complacency in emerging market assets around China," she said.

The Shanghai Composite Index fell 0.3% while benchmarks in Hong Kong and Singapore fell 0.1% and 0.3% respectively. Australian stocks shed 0.3% amid worries about banks' earnings and weakness in the mining sector.

South Korean equities powered to record highs, however, adding 1% Thursday as index heavyweight Samsung advanced.

Japan's markets were closed for a holiday Thursday.

Paul Hannon

and

Yifan Xie

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at ese.erheriene@wsj.com

European stocks and Wall Street futures climbed Thursday on signs of economic growth and upbeat corporate results, brushing off a steep drop in commodity prices.

Futures pointed to a 0.3% opening gain for the S&P 500 and Dow Jones Industrial Average despite a sluggish lead from Asian markets, as investors reflected on the Federal Reserve's vote of confidence in the economy and parsed a fresh set of earnings reports.

The U.S. central bank left interest rates unchanged on Wednesday but said it expected the economy to rebound from a soft first quarter, signaling it is likely to continue gradually raising rates this year if the data hold up.

Shares of American International Group moved higher in pre-market trading after swinging to a profit, extending a mostly positive earnings season, but shares of Facebook Inc. and Tesla Inc. slipped.

Upbeat economic data from Europe also lifted stocks Thursday despite a sluggish lead from Asian markets. The Euro Stoxx 50 index of blue-chip eurozone companies was up 0.8% in afternoon trading, on track for its best finish since 2015, after a measure of activity in the eurozone's manufacturing and services sectors rose to a six-year high and retail sales figures improved.

"For the first time since the European sovereign debt crisis broke out, we have a synchronized economic upswing in almost all continental European economies," said Frank Engels, head of multi-asset portfolios at Union Investment.

Germany's benchmark DAX index was up 0.8%, on track for another record close, while stocks in Italy jumped 1.5% after a gauge of Italy's services sector reached its highest in a decade. The euro climbed 0.3% to $1.0922, not far off its best level this year, while the British pound rose 0.1% to $1.2885 after U.K. business surveys picked up speed.

Earnings reports also pushed stocks higher in Europe, with shares of Royal Dutch Shell PLC up 1.7% after the energy giant said first-quarter profit more than quadrupled from a year ago, and HSBC Holdings PLC up 4.1% after its results raised expectations for share buybacks.

Government bonds remained under pressure Thursday as investors solidified expectations for the Fed to raise rates next month. Fed-fund futures tracked by CME Group suggest investors now see a 78.5% chance of a rate rise in June.

Yields on 10-year Treasurys rose to 2.350% Thursday from 2.309%, while the WSJ Dollar Index, which tracks the dollar against a basket of currencies, was little changed after rising 0.5% on Wednesday.

Investors were also watching political developments after House Republican leaders said the chamber would vote Thursday on their bill to replace most of the Affordable Care Act and French candidates faced off in a debate ahead of presidential elections.

The gap between French and German bonds narrowed to around its lowest since November on Thursday following a live head-to-head debate between French presidential candidates Emmanuel Macron and Marine Le Pen late Wednesday, which analysts said kept Mr. Macron in the lead.

"More and more [investors] believe there is almost no risk entailed in the second round of the French election," said Mr. Engels, pointing to the accuracy of the polls in the first round of the vote.

Stock-market gains Thursday came despite a steep drop in commodities prices that weighed on mining shares, with Brent crude oil last down 1.8% at $48.87 a barrel and metals prices lower across the board.

A global fall in metals prices gained speed in Asian trading Thursday amid concerns about Chinese demand for commodities such as steel and iron. China's iron-ore futures opened at the 8% limit drop, while copper futures in London were last down 1.2% and gold fell 1.6% to $1,229 an ounce.

A Caixin reading on China's service-sector activity hit its lowest level in nearly a year for April on Thursday, adding to concerns about the country's economic health, though it remained in expansion territory.

"China has been gradually but appreciably tightening credit," said Tina Byles Williams, chief investment officer and chief executive at FIS Group, noting that is slowly showing up in economic data and metal prices.

"I don't see catastrophe, but I do think there's a lot of complacency in emerging market assets around China," she said.

The Shanghai Composite Index fell 0.3%, ending lower for a third straight session while benchmarks in Hong Kong and Singapore fell 0.05% and 0.3% respectively. Australian stocks shed 0.3% amid worries about banks' earnings and weakness in the mining sector.

South Korean equities powered to record highs, however, adding 1% Thursday as index heavyweight Samsung advanced.

Japan's markets were closed for a holiday.

--Ese Erheriene,

Paul Hannon

and

Yifan Xie

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

May 04, 2017 09:22 ET (13:22 GMT)