Dow Futures Gain Ahead of Busiest Q2 Earnings Day; ECB Rate Decision in Focus
Frankfurt (July 25) U.S. equity futures were little changed Thursday, while global stocks edged higher on bets of near-term support from the world's biggest central banks, as investors prepped for the busiest day of the corporate earnings season on Wall Street.
Just over 50 companies will report quarterly profits Thursday, including tech and retail giants Amazon (AMZN - Get Report) and Alphabet (GOOGL - Get Report) after the close of trading and industrial bellwethers 3M Co. (MMM - Get Report) , Dow Inc. (DOW) prior to the opening bell. With around a fifth of S&P 500 companies reporting so far this season, analysts at FactSet suggest collective second quarter earnings are on pace to fall 1.9% from last year, a figure that would mark the first back-to-back decline in three-month profits since 2016.
The earnings weakness, as well as some of the softest manufacturing data in nearly a decade, hasn't blunted global stocks or snuff out gains on Wall Street, with investors riding hopes of near-term interest rate cuts from the Federal Reserve, the Bank of England, the Bank of Japan and the European Central Bank that have propelled stocks in various G-7 economies to multi-month highs.
On Wall Street, stocks remain withing touching distance of fresh record peaks ahead of next week's Fed rate decision, from which investors are pricing in a 100% chance of a 25 basis point rate cut. That certainty isn't priced into expectations from today's ECB rate decision in Frankfurt, which will be announced at 7:45 Eastern time, but investors are nonetheless expecting either modestly lower rates or direct signals for near-term support from President Mario Draghi as he prepares to hand the reins to incoming boss Christine Lagarde.
Early indications from U.S. equity futures, however, suggest investors are first waiting for both the ECB rate decision and earnings updates before reaching for new record peaks, with contracts tied to the Dow Jones Industrial Average suggesting a 22 point gain and those linked to the S&P 500 little-changed from last night's close.
European stocks were broadly higher ahead of the ECB rate decision, even as a key reading of business sentiment in Germany suggested deepening pessimism in the region's biggest economy, with markets getting help from a euro currency trading at a two-month low of 1.1124 against the U.S. dollar.
The Stoxx 600 benchmark was seen 0.25% higher by mid-day in Frankfurt while Britain's FTSE 100 edged 0.1% higher in London as the pound held at 1.2467 against the dollar.
Overnight in Asia, Japan's Nikkei 225 reached a three-month high during intra-day trading before fading into the close, while stocks around the region ground to multi-month highs amid hopes that next week's face-to-face meeting between U.S. and China trade representatives will lead to a much-anticipated breakthrough in the on-again/off-again negotiations.
Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, edged modestly higher to 97.75 as the euro drifted lower into the ECB rare decision, while benchmark 10-year Treasury bond yields drifted lower, to 2.029%, as Wall Street futures sputtered.
Global oil prices extended gains in overnight trading following Energy Department data yesterday which showed a much bigger-than-expected decline in U.S. crude stocks.
The Energy Information Administration, the Energy Department's statistics office, said U.S. crude supplies fell by 10.8 million barrels in the week ending July 19, more than double the 4 million barrels forecast by analysts. The figures from the EIA followed a private reading from the American Petroleum Institute which said domestic stocks fell by 10.961 million barrels, the second biggest of the year. The collective decline in U.S. stockpiles over the past four weeks has topped 24.535 million barrels, EIA data indicates.
Brent crude contracts for September delivery, the global benchmark, were seen 44 cents higher from their Wednesday close and changing hands at $63.62 per barrel while WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 34 cents higher at $56.22 per barrel.
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