Stocks gain as Apple earnings boost sentiment

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London - European stocks rose with US equity-index futures as Apple's earnings fuelled optimism over the outlook for the global economy. The yen weakened and Japanese shares rallied after the prime minister signalled he was committed to a $265bn stimulus package.  

Apple and its suppliers in Europe and Asia advanced after the iPhone maker reported a smaller-than-estimated decline in revenue. Positive earnings by companies from LVMH Moet Hennessy Louis Vuitton to PSA Group helped lift the Stoxx Europe 600 Index to a third day of gains.

Japan’s currency slid for the first time this week on speculation stimulus will boost demand for higher-yielding assets at home and abroad. The yield on two-year Treasuries was little changed near a one-month high as investors awaited the Federal Reserve’s latest assessment of the economy.

Equities worldwide regained about $3.9trn in the past month amid optimism central banks will boost stimulus and better-than-forecast earnings from companies including Microsoft Corporation and Morgan Stanley.

Almost 80% of analysts surveyed by Bloomberg forecast the Bank of Japan will expand its stimulus program Friday, while the Fed is expected to keep interest rates unchanged on Wednesday.

"The good earnings are driving us further today," said Michael Woischneck, who oversees about €300m at Lampe Asset Management in Dusseldorf, Germany. "But we have to be aware what the Fed tells us tonight after their two-day meeting."

Stocks

The Stoxx 600 rose 0.7% in London at 8:43 a.m. in New York. Nasdaq 100 futures expiring in September climbed 0.8%, while contracts on the S&P 500 Index added 0.2%, with the gauge near a record.

Apple rallied 7.5% after saying iPhone demand picked up and forecasting fourth-quarter sales that may exceed analysts’ estimates. European suppliers Dialog Semiconductor and AMS climbed more than 3.5%.

LVMH jumped 7.3% after the world’s biggest luxury-goods maker reported stronger demand for its champagnes and cognacs. PSA surged 8.1%, leading a gauge of automakers to the best gain among industry groups in Europe, after the maker of Peugeot and Citroen cars reported a jump in first-half earnings.

Deutsche Bank slid 3.1% after saying profit was almost wiped out by a slump in trading revenue and costs tied to job reductions. BASF fell 2.7% after reporting quarterly profit that missed analysts’ estimates.

Twitter Inc. tumbled 9.7% after giving a third-quarter revenue forecast that trailed projections. Coca-Cola slipped 1.7% on second-quarter sales that trailed analysts’ estimates.

The Shanghai Composite Index slid 1.9% after the 21st Century Business Herald reported the country’s banking regulator is considering tightening curbs on the $3.6trn market for wealth management products.

Egyptian stocks rallied the most in the world, surging 5%, after the government said it’s negotiating an International Monetary Fund loan to help revive the economy.

Currencies

The yen weakened 1% to 105.71 per dollar, after advancing 1.4% in the previous two days. Prime Minister Shinzo Abe said his total program will amount to ¥28trn ($265bn), with some unspecified part coming in a supplementary budget for 2016.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.2% following Tuesday’s 0.3% drop. The dollar pared gains after a government report showed durable goods orders fell more than expected in June while orders for business equipment rose for the first time in three months.

The pound weakened versus the euro even as a report showed UK economic growth was stronger than expected in the second quarter, accelerating to 0.6% from 0.4% in the first.

The data predated the June 23 referendum that resulted in the shock decision to leave the European Union and recent surveys suggest the vote delivered an immediate and sharp blow to business and consumer sentiment.

"The fact that the pound fell tells you that the market is seeing right through this, "said Gavin Friend, a strategist at National Australia Bank in London.

"It sees it as a historical number with expectations of weakness to come. That’s quite indicative of the way the market is now looking through anything that’s good."

The pound slipped 0.1% to $1.3115. Friend sees the sterling sliding to $1.25 by the end of the year.

Bonds

Treasuries were little changed, with the yield on two-year notes at 0.75%. The rate on benchmark 10-year notes fell two basis points to 1.54%.

The US is scheduled to sell 15 billion dollars of two-year floating-rate notes on Wednesday, a day after an auction of US five-year notes drew the weakest demand since 2009. This week’s auctions have signalled investor demand is waning with yields near record lows and odds of a Fed rate increase this year close to 50%, based on futures trading.

Commodities

Copper fell 0.9%, leading most industrial metals lower following reports on Chinese curbs on wealth-management products. Zinc and lead each slid 1%.

Oil traded near the lowest closing price in three months as industry data showed US crude stockpiles at the nation’s biggest storage hub expanded by 1.4 million barrels, swelling supplies that are already at a seasonal record.

West Texas Intermediate slipped 0.3% to $42.81 a barrel and Brent traded at $44.50. Gold was also little changed, at $1 319.73 an ounce.

ZAR/USD
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11.86
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1777.17
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51028.79
(+1.78)
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