European stock markets were mostly unchanged early on Tuesday. Jitters before US earnings season were offset by some bright spots in the banking sector after Italy agreed on a €5bn rescue fund and job losses at Japanese bank Nomura (NYSE:NMR) prompted a big leap in its share price.
Alcoa (NYSE:AA), perhaps unsurprisingly as a metals and materials company didn't get US earnings off to the best of starts as shares fell 2% afterhours. The company's earnings slid slightly less than expected whilst the drop-off in sales was worse than forecast.
The Italian bank rescue fund has surpassed expectations that it might get watered down in the final hours of negotiations. Top Italian banks are already seeing the benefit of their investment into the fund that will be used to bailout smaller banks via the increase in their share price. The €5bn size of the fund is paltry in comparison to the €360bn in non-performing loans in Italy so is really just a confidence-boosting measure.
Reports that Nomura will shutter its European equities, underwriting and derivatives businesses involving the loss of around 500 jobs saw its share prices leap as much as much as 9%.
The US dollar breaking technical support to hit its lowest since August has played its part in the oil price bounce that helped keep market sentiment stable. The Fed's Williams and Lacker speak on Tuesday but are unlikely to put much of a dent in the feeling that April and likely June are off the table for a US rate hike.
The British pound gained after a surprisingly big monthly change in annual inflation stats. UK CPI saw a surprise increase to 0.5% y/y in March from 0.3% while core prices grew 1.5% y/y, up from 1.2%. The British pound is one of the best-performing currencies over the past two days as shorts got squeezed on a failure to sustain losses beneath the psychological 1.40 level. Today’s inflation data gives some durability to sterling's recent strength and complicates the Bank of England rate decision on Thursday.
US stocks look set for a higher open as investors look past weak results from Alcoa with an eye on the gain in oil prices and a drop in the Japanese yen.
US investors gave up the goose on Monday with the Dow erasing triple digit gains to close lower as the S&P 500 fell back into the red for 2016. The reversal in US stocks came in spite of US oil closing above $40 per barrel for the first time in almost a month. For the time being, the emphasis for US investors appears to have shifted away from oil and the Fed to corporate earnings.
USA pre-opening levels
S&P 500: 7 points higher at 2,048
Dow Jones: 48 points higher at 17,604
Nasdaq 100: 18 points higher at 4,476
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