US stocks gained at the open in New York on Friday following a spate of better than expected corporate earnings from some of the country’s biggest banks.
The blue-chip S&P 500 was up 0.3 per cent after JPMorgan Chase beat estimates with first-quarter profit rising 52 per cent. Wells Fargo and Citigroup also reported higher than expected corporate earnings. JPMorgan led gainers, up 7.3 per cent as the KBW Nasdaq bank index added 1.3 per cent. The tech-heavy Nasdaq was down 0.4 per cent.
The results indicated the turmoil in the US banking sector last month had had little immediate impact on the profitability of the biggest companies.
Joe Amato, equities chief investment officer at Neuberger Berman, said the biggest concern was that the biggest banks were at risk of depositors withdrawing their money.
“At least the initial numbers were OK, but given interest rate margins, they are facing pressure to keep deposits stable. [Earnings results] will be more meaningful for [the] next tier of banks down,” said Amato.
Investors have also drawn encouragement from US data on Thursday that indicated the economy was slowing in response to the Federal Reserve’s aggressive series of interest rate rises to curb inflation.
The producer price index showed that demand unexpectedly fell 0.5 per cent in March. New jobless claims figures revealed that the number of people filing for unemployment benefits climbed more than expected to 239,000.
Analysts at Deutsche Bank said the latest data painted a conflicting picture. “On the one hand, an array of leading indicators are pointing to a US recession over the coming year . . . But if you wanted to take the opposite view, you could point to unemployment around its lowest in decades . . . along with growing signs that inflation is softening and the Fed are nearing a pause in their rate hikes.”
Investors are pricing in a 70 per cent chance that the Fed will raise rates by 0.25 percentage points at its next meeting in May rather than leave them unchanged, and roughly even odds that the European Central Bank will choose to raise rates by half a percentage point over a quarter percentage point rise.
European stocks continued to extend their gains by afternoon trade. The region-wide Stoxx 600 rose 0.7 per cent, Germany’s Dax was up 0.5 per cent and the UK’s FTSE 100 climbed 0.7 per cent. France’s Cac 40 pushed on to yet another record high, up 0.6 per cent.
“After the big hit to the market from turmoil in the banking sector, macroeconomic fundamentals have improved — with equities and the euro strengthening,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.
In currency markets, the dollar index, which measures the greenback against six peer currencies, earlier fell to its lowest level in nine months before rising 0.4 per cent.
The euro fell 0.3 per cent after rising to its highest level in a year against the dollar on Thursday. Sterling fell 0.4 per cent against the dollar, after touching $1.25, its highest level in almost a year.
Two-year Treasury yields rose 0.1 percentage points to 4.09 per cent and the yield on the 10-year notes rose 0.05 percentage points to 3.5 per cent.
In Asia, the CSI 300 closed up 0.6 per cent and the Hang Seng index rose 0.5 per cent.
Gold was down 0.6 per cent at $2,026.68, after reaching its highest price since March 2022 on Thursday.
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