Markets Tread Water Ahead of U.S. Bank Earnings -- 3rd Update
Dollar softens after Fed minutes
-- Stocks in Japan, South Korea touch records
-- Big banks set to report earnings
Stocks stalled in Europe but rose in Asia Thursday after major U.S. indexes climbed to fresh records.
The Stoxx Europe 600 was flat in morning trading as a fall in government bond yields weighed down the banking sector.
Futures pointed to a small opening declines on Wall Street after the S&P 500, Dow Jones Industrial Average and Nasdaq Composite Index all ended at their highest on record Wednesday in an advance that accelerated toward the end of the session when other global bourses were closed.
Earnings reports from J.P. Morgan Chase & Co. and Citigroup are due later Thursday followed by results from Bank of America and Wells Fargo & Co. on Friday. Investors globally will be watching carefully to gauge not just the health of the U.S. financial system but the outlook from top executives for the final quarter of the year.
"We're positive on financials," said Antoine Lesné, who runs a research and strategy team at State Street Global Advisors. The potential for Washington to orchestrate tax cuts and deregulate the sector should benefit share prices, while worries about Spanish and Italian lenders' health are for now offset by a still strong economic environment in Europe, he said.
Asian stock markets extended gains, taking cues from records set on Wall Street Wednesday and a robust earnings outlook for the region.
Japan's Nikkei Stock Average gained 0.4%, building on Wednesday's rise to a 21-year closing high. The market's strength came despite overnight appreciation in the yen, which usually weighs on export-related stocks.
Technology shares led gains in Japan, but energy stocks weakened following a drop in oil prices. Brent crude oil was last down 0.5% at $56.68 a barrel.
South Korea's Kospi added 0.7% to Wednesday's record close, while stocks in New Zealand inched up 0.1% to an eighth straight closing record.
Strong earnings growth has supported major stock indexes this year, and some analysts said they expect third-quarter results to continue to outperform expectations.
"What you are seeing in Asia is that there is some good recovery in earnings," said Frank Benzimra, head of Asia equity strategy at Société Générale, following stagnant earnings growth between 2011 and 2016.
In Hong Kong, the Hang Seng Index reversed early losses to trade up 0.2% amid gains in financials and property stocks.
The Shanghai Composite Index was little changed ahead of new policy initiatives from the Communist Party Congress, which starts next week. Chinese market regulators have taken steps to ensure stocks remain stable ahead of the congress and state-backed investment funds have been intervening to limit market swings, traders said.
The broad equity gains in Asia also come as the Federal Reserve signaled its confidence that the U.S. economy was strong enough to support further rate increases.
"The Fed minutes indicated a positive outlook on the U.S. economy. That augurs well for global growth," said Alex Wijaya, head of Southeast Asia for Axicorp Financial Services.
Minutes from the Fed's latest policy meeting, released Wednesday, showed most officials expect the central bank to raise short-term interest rates again this year. Still, some officials also signaled doubts about the inflation outlook, sending the WSJ Dollar Index down 0.1% on Thursday.
Fed-fund futures tracked by CME Group show investors currently price an 82.9% chance of a rate rise in December, compared with an 87.8% chance priced on Tuesday.
Yields on 10-year Treasurys edged down to 2.328% Thursday from 2.346% Wednesday, signaling a rise in prices.
Investors were also parsing comments from the European Central Bank's chief economist Peter Praet on Wednesday that the bank has made "insufficient progress" toward its inflation target.
German debt fell to 0.448% from 0.457% Wednesday, while Italian yields fell to 2.130% from 2.162% after the government there won the first two ballots on a new election law that investors say makes it more difficult for the 5 Star Movement to gain power.
Spanish 10-year yields edged down to 1.630% from 1.634%, their lowest since the Catalan independence referendum at the start of the month. A record volume of the Spanish bonds traded hands on Tradeweb last week, and volumes nearly equaled the notional volume of German bund activity in the first week of October, according to Tradeweb.
Shen Hong
, Ian Walker and
Kevin Kingsbury
contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
October 12, 2017 04:59 ET (08:59 GMT)