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

By Riva Gold and Ese Erheriene Features Dow Jones Newswires

European stocks and S&P 500 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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The Stoxx Europe 600 was up 0.4% in morning trading while Germany's DAX index rose 0.7% from a record high as earnings reports pushed up the oil and gas and banking sectors.

Shares of Royal Dutch Shell PLC climbed 2.9% after the energy giant said first-quarter profit more than quadrupled from a year ago, while HSBC Holdings PLC rose 2.2% after reporting better-than-expected first quarter profit.

Investors also drew encouragement from fresh signs of health in the eurozone economy. IHS Markit raised its estimate for the eurozone's composite purchasing managers indexes in April after a six-year high in March. while data showed eurozone retail sales rose for the third straight month.

A gauge of Italy's services sector meanwhile surpassed expectations to reach its highest since 2007, sending Italy's FTSE MIB index up 1.3%.

The euro climbed 0.3% against the dollar to $1.0923, not far off its high of the year, while the British pound rose 0.1% to $1.2886 after the U.K.'s services index for April beat forecasts.

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Futures pointed to a 0.2% opening gain for the S&P 500, as investors also digested earnings from Facebook Inc. and Kraft Heinz Co.

In government bonds, the gap between French and German bonds narrowed to around its lowest since November in morning trading 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.

"The tone of the last French presidential debate was at times aggressive but failed to produce the sort of slip-up that could materially alter Macron's roughly 20 points lead," strategists at Mizuho wrote. The final vote takes place May 7.

Yields on 10-year German government bonds rose to 0.365% from 0.327% on Wednesday while French yields edged up a bit less to 0.756% from 0.737%. Investors had sold French debt and bought German debt earlier in the year to protect against the chance that the country could elect a euroskeptic candidate and ultimately leave the currency union. Yields move inversely to prices.

France's CAC-40 index was up 0.7%, while the wider Euro Stoxx 50 index of blue-chip eurozone companies climbed 0.6%, bringing this year's gains close to 10%.

The WSJ Dollar Index, which tracks the dollar against a basket of currencies, was last down 0.1% after rising 0.5% on Wednesday. U.S. 10-year Treasury yields rose to 2.335% Thursday from 2.309%.

The dollar and government bond yields had inched higher Wednesday after the Fed left interest rates unchanged 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.

"The key over the coming weeks will be the economic data from the U.S.," said Lee Ferridge, head of multiasset strategy for North America at State Street Global Markets.

Investors now price a 74% chance of a rate rise at the June meeting, according to fed-funds futures tracked by CME Group, a touch higher than before the meeting.

Gains in stocks on Thursday came despite a steep drop in commodities prices that weighed on the basic resources sector, with Brent crude oil last down 0.6% at $50.51 a barrel and metals prices lower across the board amid concerns about Chinese demand for commodities such as steel and iron.

A global fall in metals prices gained speed in Asian trading Thursday as China's iron-ore futures opened at the 8% limit drop, while copper futures in London were last down 0.4%, building on Wednesday's steep declines. Gold fell 1% to $1,236 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 markets across Asia mostly moved lower. Benchmarks in Hong Kong and Singapore fell 0.1% and 0.3% respectively, while 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

(END) Dow Jones Newswires

May 04, 2017 05:57 ET (09:57 GMT)