LONDON, UNITED KINGDOM – Major global equities rose Tuesday, with sentiment soothed after a series of upbeat US earnings and Britain shredded its controversial budget.
Analysts pointed to better-than-expected reports from Goldman Sachs and Johnson & Johnson as a positive driver for stocks, along with shifting investor sentiment.
On Wall Street, the Dow Jones jumped two percent at the open after a day of strong trading in Asia and Europe, before paring back gains later in the morning.
Goldman Sachs reported a third-quarter update that topped analyst expectations on strong trading revenues.
The investment bank followed on from positive earnings news from the Bank of America on Monday, days after JPMorgan Chase and others also logged solid numbers.
“Better-than-expected US earnings reports sparked a rally on Wall Street with positive momentum reverberating across European equities,” Interactive Investor analyst Victoria Scholar told AFP.
“Risk appetite is picking up after a volatile week for markets, as corporate results look to be the main driver of price action today.”
US industrial production also picked up more than anticipated in September, according to official data Tuesday, bouncing back after a dip in August.
Analysts remain hopeful that an upbeat third-quarter results season could give a shot in the arm to markets which have been slammed this year on fears over inflation and Federal Reserve interest rate hikes.
But Craig Erlam, senior market analyst at OANDA, warned the upbeat investor sentiment might not last, saying there was a “strong feeling of a bear market rally about trading over the course of the last week.”
“From the post-US-inflation rebound to what has now been a strong start to the week – in part driven by the UK’s decision to no longer shoot itself in the foot – nothing about this screams sustainable.”
UK turbulence
Frankfurt stocks closed up one percent on Tuesday as a key survey showed German investor confidence climbed slightly in October, but it still held at a low level.
The British pound retreated slightly after jumping Monday above $1.14 as the UK government sensationally ripped up its controversial debt-fueled budget.
After a volatile few weeks during which the pound hit a record low, new finance minister Jeremy Hunt sought Monday to reassure investors as he scrapped tax cuts and warned of tough spending cuts.
Monday’s move, which dealt a blow to Prime Minister Liz Truss’s authority, sent sterling up as much as two percent at one point and the cost of government borrowing tumbled, while the FTSE 100 jumped.
“Investors continue to monitor the political and economic turbulence surrounding the UK,” noted XTB analyst Walid Koudmani.
Markets in China fluctuated a day after authorities delayed the release of third-quarter economic figures, which analysts said were likely to show the weakest growth since the pandemic owing to COVID-19 lockdowns.
The decision comes as the Communist Party holds a key gathering at which President Xi Jinping is expected to be handed a third term.
Oil prices slumped Tuesday in response on the expectation that the US will draw more barrels than expected from its strategic reserves heading into the winter season.