European stocks touch fresh highs ahead of U.S. earnings
European stocks rose to their highest in over a year on Monday just as U.S. earnings season gets into full swing this week and a raft of Chinese data is due to offer insight into how quickly the world’s second-largest economy is recovering.
Better than expected first-quarter earnings reports on Friday from JP Morgan (JPM.N), Citigroup(C.UL) and Wells Fargo (WFC.N) helped to buoy sentiment in markets, whipped around last month by turmoil in the banking sector.
“Kicking off on a high note, the U.S. earnings season saw leading U.S. banks disclose figures that exceeded expectations, even in light of the sector’s recent upheaval,” said Bruno Schneller, a managing director at INVICO Asset Management.
This upbeat news lessened the odds of a rate reduction later this year, said Schneller.
Markets have also seen a mood shift on the outlook for U.S. interest rates, with CME futures implying an 81% chance the Federal Reserve will increase rates by a quarter point to 5.0-5.25% in May.
Resilience in core U.S. retail sales and a jump in inflation expectations reported on Friday have led investors to trim the amount of easing expected later this year to around 55 basis points (bps) in total.
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