Earnings help stocks, but nerves remain

Share markets have steadied, taking comfort in technology earnings, though an energy crisis in Europe and China’s lengthy lockdowns kept the mood cautious and have propelled the dollar close to 20-year highs as investors seek out safety and yield.

Nasdaq 100 futures were up 1 per cent in the Asia session and S&P 500 futures rose 0.7 per cent after Facebook owner Meta beat Wall Street profit forecasts and said it had eked out user growth, sending its shares up almost 20 per cent after hours.

A rally in Microsoft shares overnight also helped Wall Street indexes to a steady close.

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MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, led by a 1 per cent bounce in Australian stocks from Wednesday’s one-month trough.

Japan’s Nikkei rose 0.6 per cent.

“The real question is whether this really matters for a durable turnaround in otherwise fraught global circumstances,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

“Volatility is still high. Even if not outright fear, the trepidation is hard to miss with ongoing uncertainty from the war in Ukraine, which continues to threaten with more widespread economic pain.”

The most recent pressure point has been Russia’s halt on gas supplies to Bulgaria and Poland, which sent tremors through European energy markets and whacked the euro.

Benchmark European gas prices jumped 10 per cent overnight, while the euro hit a five-year low of $US1.0514 and is headed for its worst month since early 2015.

The currency is now perilously close to huge chart support levels stretching from $US1.0500 down to a trough from 2017 at $US1.0344.

A break would take it to depths not seen since 2002 and risk a damaging decline below parity.

The drop has sent the US dollar index to a five-year high of 103.28, and a further push above 103.82 would see it to levels not visited since late 2002.

“With COVID lockdown fears in China exaggerating upside risks for the dollar, we recognise the possibility of a stronger-for-longer dollar,” said Rabobank FX strategist Jane Foley, adding the bank was revising its forecast for a euro rebound.

Elsewhere the Japanese yen was under pressure at 128.71 ahead of the Bank of Japan’s policy meeting on Thursday, where focus will be on any sort of response to the yen’s recent slide.

Oil inched lower and Brent crude futures were last down 0.4 per cent to $US104.95 a barrel on concern about Chinese demand as rising coronavirus cases suggest extended lockdowns.

Earnings help stocks, but nerves remain
Independent Information