Tech Giants' Earnings Loom, Stocks Rebound Continues

The rally off the July lows has continued with Wall Street and European futures closing higher on hopes for dovish guidance from the Federal Reserve and Bank of England. Major tech companies like Microsoft, Apple, Amazon, and Meta are set to report earnings this week, with high expectations potentially testing their valuations.

Equities

The FTSE 100 rose by 1.2% to close at a two-month high, bolstered by strong corporate earnings and a positive global sentiment. Among the standout performers, NatWest shares jumped 7% to a near decade high after raising its outlook and acquiring a £2.4 billion mortgage book from Metro Bank.

Drax Group surged nearly 14% following a higher first-half profit report and expectations of annual profit reaching the top end of market forecasts. Babcock International climbed 8.6% as it maintained its full-year forecast, and Jupiter Fund Management rose 6.8% on better-than-expected profit results.

On Wall Street, the major indices saw significant gains. The Dow Jones Industrial Average increased by 1.64% to 40,589.34 points, the S&P 500 gained 1.11% to 5,459.10, and the Nasdaq Composite climbed 1.03% to 17,357.88. The S&P 500, despite these gains, was down 0.83% for the week, while the Russell 2000 index secured its third straight week of gains, rising 11.51%, marking its strongest three-week performance since August 2022.

In the US, Treasury yields fell following the release of favourable inflation data. The yield on the benchmark 10-year notes dropped 6.2 basis points to 4.194%, while the 2-year note yield fell 5.6 basis points to 4.3873%, marking its fourth weekly decline in the past five weeks. The dollar index slipped slightly, with the euro and yen showing modest gains against the greenback.

US crude oil prices also declined, with WTI settling down 1.43% at $77.16 per barrel and Brent falling 1.51% to $81.13 per barrel, influenced by concerns over declining Chinese demand and hopes for a Gaza ceasefire agreement.

MSCI’s gauge of stocks across the globe rose 0.84% to 803.47 points, although it was on track for its second consecutive weekly fall. European shares mirrored this positive trend with the STOXX 600 closing up 0.83%, despite a weekly decline of 0.27%.

Forex & Commodities

The US dollar index slipped 0.03% to 104.30, with the euro up 0.1% at $1.0855. The dollar also weakened 0.1% to 153.78 against the yen, marking its biggest weekly percentage drop against the Japanese currency since early May. Sterling strengthened 0.16% to $1.2871 as traders awaited the Bank of England’s policy meeting, with uncertainty about possible rate changes.

Gold prices rose 1% on Friday, driven by falling US Treasury yields and expectations of a Fed rate cut in September. Spot gold increased by 0.8% to $2,382.98 per ounce, while US gold futures for August delivery settled 1.2% higher at $2,381.

Oil futures fell about 1.5%, ending the week lower due to declining Chinese demand and hopes for a Gaza ceasefire that could ease Middle East supply concerns. Brent crude settled down 1.5% at $81.13 a barrel, while West Texas Intermediate crude ended 1.4% lower at $77.16 a barrel. For the week, Brent was down over 1%, and WTI fell more than 3%.