By Marc Jones
LONDON (Reuters) – A healthy crop of earnings helped European stocks bust out of a four-day losing streak on Thursday, while the dollar made gains after U.S. President Donald Trump quashed fresh speculation that he was about to fire Fed head Jerome Powell.
Europe’s STOXX 600 made a solid start as record orders at Swiss engineering giant ABB and record $13.5 billion profits at Taiwanese chip giant TSMC came along rising optimism about a EU-US trade deal after talks were held in Washington.
Traders were awaiting U.S. retail sales and jobless claims data too which will give a little more insight on how tariffs are impacting the economy, and digesting the European Commission’s proposal for a major increase in its budget.
It was the currency market moves that remained the immediate focus however.
The dollar was up 0.4% at $1.16 against the euro, bringing it largely back to where it had been before what Societe Generale’s Kit Juckes described as Wednesday’s “madness” triggered by reports Trump was readying to oust the Fed chief – which he later scotched.
Japan’s yen gave the greenback further help as polls showing Prime Minister Shigeru Ishiba’s coalition was in danger of losing its majority in the upper house in upcoming elections pushed it towards its lowest since April at 148.73 to the dollar.
Data had also shown the Asian nation’s exports were starting to feel the impact of tariffs with shipments down for a second straight month, while Australia’s dollar had taken a 1% overnight tumble after weak employment numbers there.
“The market has got itself solidly short on the dollar and we are going into high summer so people are starting to buy it back a bit,” Juckes said.
WATCHING NETFLIX
Earnings due later from streaming giant Netflix, industrial heavyweight General Electric and drinks firm PepsiCo were also on investors’ radar.
With Netflix having outperformed the S&P 500 year-to-date by a sizeable 33 percentage points and analysts still bullish the firm “will need to blow the lights out with a solid beat and raise,” Chris Weston, head of research at broker Pepperstone said.
Wall Street futures were pointing to fractionally higher start later.
European stocks were up a comfortable 0.7% after its four-day run of fall while Japan’s Nikkei and bluechip markets in Taiwan and China had all notched 0.3%-0.6% rises overnight.
Ending what would have been the biggest foreign takeover of a Japanese company, Canadian retailer Alimentation Couche-Tard withdrew its $47 billion takeover bid for Seven & i Holdings, citing a lack of constructive engagement by the operator of 7-Eleven convenience stores.
Shares of Seven & i Holdings slid to a three-month low and ended down over 9%.
Trump’s quick denial of the Powell speculation had helped restore some calm to volatile markets, but he kept the door open to the possibility of ousting him and renewed his criticism of the central bank chief for not cutting U.S. interest rates.
“After yesterday’s scare, markets have probably built even more resistance to headlines on this topic” ING analyst Francesco Pesole said. But, “in that hour, we saw the reaction we would have expected: a steepening in the U.S. yield curve, and the dollar sharply lower.”
Shorter-term Treasury yields had fallen due to the expectations that any Powell replacement would be an ultra-dove and lead to quicker and deeper rate cuts.
The benchmark 10-year Treasury yield was little changed at 4.4714% in European trading on Thursday, while German Bund yields were a steady 2.695%, having touched their highest since late March earlier this week. [GVD/EUR]
In the commodity markets, Brent oil prices rose as much as 0.4% to $68.78 a barrel and safe-haven metal gold slipped 0.5% to $3,331 an ounce. [GOL/]
(Reporting by Marc Jones)
