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Thursday 21.00 BST

What you need to know

  • S&P 500 rallies 1.9%; Nasdaq jumps 3%
  • Focus remains on earnings after recent concerns
  • Euro slips and Italian bond yields rise
  • ECB to leave monetary policy on hold as expected
  • Oil prices fall further on increased Saudi output

Overview

US stocks staged a solid rebound after the previous day’s savage sell-off, as forecast-beating earnings reports from the likes of Microsoft, Ford and Twitter provided a more encouraging backdrop.

The main equity indices on Wall Street recouped much of Wednesday’s losses, which had wiped out all the gains made by the S&P 500 in 2018 and left the Nasdaq Composite nursing its biggest one-day fall for seven years.

Yet the underlying mood remained cautious as recent uncertainty about corporate earnings growth — given the Trump administration’s protectionist policies, the strong dollar and the prospect of further rate rises from the Federal Reserve — kept market participants unsettled.

“So far, the US earnings season has been decent, with approximately 30 per cent of the S&P 500 companies by market capitalisation having reported and 83 per cent of those having beaten analysts’ expectations,” said Kerry Craig at JPMorgan Asset Management.

“The anxiety now in markets stems from whether this is the peak in earnings and growth, as higher input costs from rising wages, the impact of tariffs and higher funding costs start to impinge on corporate margins.”

Meanwhile, the euro slipped to a two-month low against the dollar while Italian bond yields fell as the European Central Bank sprang no surprises at its policy meeting— reiterating that it would halt its asset purchase scheme by the end of 2018, despite recent market turbulence and uncertainty over Italy’s budget.

“The recent weakening of the eurozone economy’s momentum has not changed the ECB’s central view of a continued recovery and a gradual rise in inflation towards its aim,” said analysts at BNP Paribas.

“This confirms the ECB’s strong bias to end net asset purchases in December. The message on Italy was conciliatory but firm — monetary policy won’t come to the rescue.”

Oil prices rallied in tandem with stocks — after retreating sharply earlier this week in response to speculation about increased supplies and slowing global economic growth.

Equities

In New York, the S&P 500 ended 1.9 per cent higher at 2,705, after rising as high as 2,722.70, while the Nasdaq Composite gained 3 per cent. The two barometers fell 3.1 per cent and 4.4 per cent, respectively, on Wednesday.

The Dow Jones Industrial Average rose 1.6 per cent on Thursday.

Microsoft shares rose 5.8 per cent, while Ford gained nearly 10 per cent and Twitter jumped some 15 per cent. Amazon rose more than 7 per cent in official trade on Thursday but fell sharply in after-hours dealings.

Across the Atlantic, the Stoxx 600 Europe ended 0.5 per cent higher — after sliding as much as 1 per cent earlier in the day. The Xetra Dax in Frankfurt rallied 1 per cent and London’s FTSE 100 gained 0.6 per cent

In Asia, Chinese stock indices ended broadly flat, although the Topix in Tokyo shed 3.1 per cent and Seoul’s Kospi index lost 1.6 per cent.

Forex and fixed income

The euro was down 0.2 per cent versus the dollar at $1.1368, just off the day’s low of $1.1356, but was up 0.3 per cent against sterling at £0.8869.

The pound was also down another 0.5 per cent against the greenback at $1.2813, its lowest point since early September, amid lingering concerns about the possibility of a “no-deal Brexit”.

The US currency was 0.2 per cent firmer against the yen at ¥112.51, helping to push the dollar index up 0.2 per cent to 96.64, the highest level since mid-August.

The yield on the 10-year US Treasury was up 1 basis point at 3.14 per cent and the two-year was flat at 2.86 per cent. Italy’s 10-year yield fell 11bp to 3.50 per cent.

Commodities

Brent oil settled 1 per cent higher at $76.89 — after earlier dipping to $75.35 — as it continued to pull away from Wednesday’s two-month intraday low of $75.11.

Just three weeks ago, the international crude benchmark touched a four-year high of $86.74.

Gold was down $4 at $1,229 an ounce.

Additional reporting by Michael Hunter in London and Hudson Lockett in Hong Kong

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