Technology stocks rallies to hit all-time high
LONDON: Technology stocks rallied yesterday at the start of a big week of earnings for the sector globally, while bond yields hit multi-year highs as investors braced for major central banks to step back from ultra-easy monetary policies. European shares were mixed in early trading, with the pan-European Stoxx 600 index broadly flat.
Tech was in focus after Swiss chipmaker AMS, a key supplier for US giant Apple, reported a doubling of its 2017 revenues and raised its earnings guidance far in excess of expectations. “Technology stocks have been at the forefront of equity market gains, and this week is pivotal for keeping the momentum going,” said Rebecca O’Keeffe, head of investment at Interactive Investor. MSCI’s global information technology sector index was 1.4 percent higher at an all-time high. Industry heavyweights Apple, Alphabet, Facebook , Microsoft and Amazon are all set to report earnings this week.
Tightening talk
US and European bond yields both reached milestones as investors prepare for central banks to tighten monetary policy, and after a European Central Bank policymaker said the ECB should spell out it would end its bond purchases this year. Dutch central bank chief Klaas Knot said on Sunday the ECB should make clear that it will end its asset purchases after the current bond buying program ends in September, adding: “There is no reason whatsoever to continue the program.” Borrowing costs for Germany, the euro zone’s biggest economy, rose, with the five-year bond yield briefly turning positive for the first time in more than three years to reach a high of 0.004 percent. It was last trading at minus 0.01 percent. US Treasury yields also rose, continuing a move to multi-year highs after strong growth figures posted on Friday.
“The Knot comments are a factor behind the sell-off in bonds today,” said DZ Bank rates strategist Andy Cossor. “There’s also the sell-off in US Treasuries.” Helped by rising bond yields, the dollar edged higher against a basket of currencies, rising a quarter of a percent to 89.30 after scoring six consecutive weeks of losses. Conflicting signals from top US officials last week did little to discourage bearish positions, with net short dollar bets increasing to their highest level since October, according to latest positioning data.
Despite yesterday’s rise the dollar is set to post its biggest monthly decline since March 2016. The currency’s decline has been a boon for many commodities, with gold making a 17month top last week and last trading at $1,346 an ounce. Oil prices dipped yesterday but remained just off their highest level in three years. Brent crude futures were holding atop $70 at $70.28 a barrel. U.S. crude futures were up 23 cents at $66.23.
Asian markets trim gains
The dollar could experience more turbulence with several major announcements coming up this week, including Trump’s State of the Union address today. Markets could also be impacted this week by the outcome of a scheduled US Federal Reserve meeting. The Fed is expected to leave the benchmark US interest rate untouched, but economists say the changing composition of the policy committee could point to faster rate rises in 2018. Industrial data from China and GDP figures from India are also expected this week. Asian markets trimmed gains after an early surge yesterday as investors tracked last week’s record-breaking close on Wall Street. The three major US indices all closed at record highs on Friday with earnings season in full swing, on the back of strong earnings announcements. —Agencies