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Markets rebound: Easing geopolitical tension and strong earnings bring recovery

People walk past the Euronext headquarters in Paris (file photo)
People walk past the Euronext headquarters in Paris (file photo) Copyright AP
Copyright AP
By Tina Teng
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European stock markets have bounced back after a three-week losing streak, bolstered by eased geopolitical tensions and robust corporate earnings. Meanwhile, Wall Street is also set for a positive week, with performance influenced by the outcomes of major tech company results.

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Global stock markets experienced a widespread rebound this week as tensions in the Middle East subsided, alongside robust quarterly earnings from companies. Sentiment appears to be recovering from a three-week sell-off earlier in April, which was triggered by escalating conflict between Israel and Iran, a hawkish stance from the Fed, and a surge in government bond yields.

Europe

The FTSE 100 reached a historic peak, surpassing its previous high in February, with a gain of 2.32%. The Euro Stoxx 600 saw a rise of 0.77%, while the DAX increased by 1.05% over a five-day trading period.

Healthcare and consumer stocks demonstrated notable strength, buoyed by positive quarterly earnings reports. AstraZeneca saw its shares surge by more than 10% this week on the back of robust first-quarter earnings. The pharmaceutical company reported a 19% increase in revenue compared to the previous year and announced an increased dividend of $3.10 per share.

Similarly, Unilever, a British consumer goods company, witnessed an over 8% rise in its stock price over the past five trading days. This increase was fueled by better-than-expected first-quarter results, with sales revenue up by 4.4% year-on-year, topping the estimated 3.5%. Conversely, Nestle experienced a decline of nearly 2% in its shares following disappointing sales revenue figures.

On the banking front, Deutsche Bank and Barclays both saw substantial increases in their share prices, rising by 12% and 11%, respectively, over the past five trading days. These gains were attributed to stronger-than-expected earnings results from both financial institutions.

Mining stocks maintained their strength, particularly in the wake of Australian miner BHP's $38.9 billion takeover bid for rival Anglo American, which valued the company at the same amount. The announcement of this offer propelled British mining stocks to surge by 16% on Thursday.

On the economic front, the Eurozone’s flash manufacturing PMI for April contracted, which is seen as positive news for the stock markets. The data may further encourage the European Central Bank to commence rate cuts sooner, which could be beneficial for market sentiment.

Wall Street

Wall Street is set for a positive close for the week amidst the ongoing US earnings season. The Dow Jones Industrial Average has climbed by 0.26%, the S&P 500 has risen by 1.63%, and the Nasdaq Composite has advanced by 2.16% on a weekly performance.

In the past five trading days, 9 out of 11 sectors have seen positive gains, with Utility and Consumer Staple stocks leading the way, up by 3.26% and 2.84%, respectively. However, the Communication Services sector experienced a decline of 2.35%, primarily driven by Meta Platform's slump. Despite this setback, technology stocks demonstrated a strong rebound from the recent weeks' sell-offs, suggesting investors may flock back to the sector for bargains.

The US tech earnings painted a mixed picture. While most companies reported stronger-than-expected results, investors reacted differently based on their respective future guidance. Netflix and Meta saw declines in their stocks due to their weaker-than-expected outlooks. Conversely, Tesla, Alphabet, and Microsoft experienced surges in their stock prices on positive outlooks, with Tesla being the sole company to notably miss earnings estimates thus far. Apple and Amazon are slated to release their earnings results next week, providing further insight into the business health of these tech giants. On a weekly basis, Tesla's shares surged by 13.5%, while Meta's stocks slumped by 12%. Additionally, Microsoft saw a 4% increase, and Alphabet surged by 14% for the week after their shares experienced significant gains in after-hours trading on Thursday.

Asian Markets

Major benchmark indices in Asian markets concluded the week on a positive trajectory, with Chinese stocks leading the gains. The Hang Seng Index surged by almost 9% for the week, buoyed by recent positive economic indicators and expectations of additional government support for the economy. Technology shares experienced a notable rebound following Beijing's announcement of subsidies for the procurement of domestic AI chips. Shares of prominent Chinese tech firms, such as Alibaba, Tencent, JD.com, and Meituan, all recorded impressive increases ranging between 10% and 18% over the week. Additionally, Baidu's stocks saw a substantial rise of nearly 8%.

The Japanese stock markets staged a recovery from the one-month sell-off, with the Nikkei 225 rising by 2.6% this week. The Bank of Japan (BOJ) held interest rates unchanged at between 0-0.1% today and would continue to conduct the bond-buying programme. The bank expects Japan’s inflation to be slightly higher in 2024. However, the BOJ did not provide any commentary regarding the significantly weakened Yen, as the exchange rate of the US dollar against the Japanese Yen surpassed 156, reaching a fresh 34-year high following the decision.

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