By Carla Mozee, MarketWatch
Deutsche Bank slides as profit slumps; earnings stream in
European stocks notched small gains Thursday, showing signs of
recovery from its deepest loss in weeks, as a fresh batch of
earnings reports rolled in.
Among those results, Deutsche Bank AG posted a steep slide in
profit and signaled it will make radical changes to its
underperforming investment bank.
Later, the European Central Bank is scheduled to release its
latest update on monetary policy, and investors will watch for any
comments from the ECB's president, Mario Draghi, on eurozone
economic growth.
How markets are moving
Following a flat open, the Stoxx Europe 600 index rose 0.2% to
380.95. The utility and telecom groups were the best performing,
and the tech sector was the sole decliner. The pan-European
benchmark on Wednesday fell 0.8%
(http://www.marketwatch.com/story/dax-drops-15-after-lift-in-bond-yields-spooks-wall-street-2018-04-25),
the biggest loss since March 23, according to FactSet data.
Germany's DAX 30 index turned lower, losing 0.1% to 12,406.03,
and France's CAC 40 index gained 0.3% to 5,428.49.
Spain's IBEX 35 picked up 0.3% to 9,890.40, but the U.K.'s FTSE
100 was off 0.1% at 7,375.83, after breaking a six-session winning
streak
(http://www.marketwatch.com/story/ftse-100-drops-after-rising-bond-yields-spur-selloff-on-wall-street-2018-04-25)
on Wednesday.
The euro was buying $1.2167, slightly higher than $1.2161 late
Wednesday in New York.
The yield on Germany's 10-year bund fell 2 basis points to
0.62%, according to Tradeweb data, as prices rose.
Check out:Why the premium for German bonds over Treasurys is the
widest in 30 years
(http://www.marketwatch.com/story/why-the-premium-for-owning-german-bonds-over-treasurys-is-at-the-widest-in-30-years-2018-04-23)
What's driving the market
Investors were sifting through a stream of earnings reports,
from big names such as Deutsche Bank, Barclays PLC and Royal Dutch
Shell PLC, with a mixed bag of results.
Putting a dampener on spirits somewhat was the persistent
strength of U.S. Treasury 10-year bond yields , which were holding
above the psychologically important 3% level. Rising bond yields
can weigh on stocks as bonds start to offer better returns than
equities and raise borrowing costs.
Investors are also treading carefully ahead of the ECB monetary
policy announcement and press conference with Draghi later in the
session. No fireworks are expected from the central bank, but there
is the potential for some light to be shed on policy makers'
thinking.
See:4 outcomes for the ECB meeting, in 1 handy chart
(http://www.marketwatch.com/story/4-scenarios-for-the-ecb-meeting-on-thursday-in-one-handy-chart-2018-04-24)
And read:Expect a careful, dovish Mario Draghi
(http://www.marketwatch.com/story/expect-a-careful-dovish-mario-draghi-at-next-weeks-ecb-meeting-says-hsbc-2018-04-18)
Stocks in focus
Deutsche Bank shares (DBK.XE) (DBK.XE) were down 2.3% after the
embattled lender said first-quarter net profit tumbled 79% to
EUR120 million
(http://www.marketwatch.com/story/deutsche-bank-profit-tumbles-79-amid-big-overhaul-2018-04-26-34852359),
and said it will shrink its U.S. investment bank. The report is the
first since it ousted Chief Executive John Cryan.
Philips Lighting NV shares (LIGHT.AE) tumbled 10% as the company
said first-quarter net profit fell 67%
(http://www.marketwatch.com/story/philips-lighting-net-profit-sales-fall-2018-04-26)
while sales fell on the poor performance of its home division.
Volkswagen AG (VOW.XE) (VOW.XE) picked up 3.4%, with the German
auto maker confirming its fiscal-year guidance
(http://www.marketwatch.com/story/volkswagen-profit-slips-confirms-fy-guidance-2018-04-26).
First-quarter revenue rose 3.6% and after-tax profit fell slightly
to EUR3.3 billion ($4 billion).
Royal Dutch Shell PLC (RDSA.LN) (RDSA.LN) was down 1.7% even as
the oil producer reported its highest quarterly profit since 2013.
First-quarter profit on a current cost-of-supplies basis -- a
number similar to the net income that U.S. oil companies report --
rose 69% to $5.7 billion.
(http://www.marketwatch.com/story/shell-profit-shoots-up-on-higher-gas-oil-prices-2018-04-26-24855213)
Barclays PLC (BCS) (BCS) shares turned higher to trade up by
0.7%. The U.K.-based lender said litigation and conduct charges
dragged it to a first-quarter loss of GBP764 million.
(http://www.marketwatch.com/story/barclays-swings-to-loss-on-doj-settlement-2018-04-26)
ECB call ahead
Traders will shift focus to the ECB announcement later for clues
on when the central bank will wind down its massive bond-buying
program and start to raise interest rates, though little or no
action is expected from the April meeting.
The ECB in March surprised markets by signaling it's on track to
end its stimulus program before year's end. But since then,
economic data have pointed to a slowdown in the eurozone economy.
That has led investors to dial back expectations for the start of
rate hikes in the middle of 2019.
As well, core inflation at 1% is still well below the ECB's
target of near, but just below, 2%. The euro has recently fallen
below $1.22, down from above $1.24 during the March 8 meeting.
The ECB's policy statement is due at 12:45 p.m. London time, or
7:45 a.m. Eastern Time. Draghi will hold a news conference at 1:30
p.m. London time, or 8:30 a.m. Eastern.
See:4 outcomes for the ECB meeting, in 1 handy chart
(http://www.marketwatch.com/story/4-scenarios-for-the-ecb-meeting-on-thursday-in-one-handy-chart-2018-04-24)
And read:Expect a careful, dovish Mario Draghi
(http://www.marketwatch.com/story/expect-a-careful-dovish-mario-draghi-at-next-weeks-ecb-meeting-says-hsbc-2018-04-18)
What strategists are saying
"We know that the ECB is not ready to raise interest rates and
they certainly don't want to see EUR/USD back above 1.24 because
that would offset the improvements in prices. Yet they also want to
end QE purchases this year -- so Mario Draghi has quite the
balancing act to do on Thursday," said Kathy Lien, managing
director of FX strategy at BK Asset Management, in a late Wednesday
note.
"We think Draghi will remain cautious and emphasize patience,
which in an environment of a rising U.S. dollar could send EUR/USD
down to 1.21 and eventually 1.20. However, if the tone of his press
conference is a bit more optimistic, EUR/USD could bounce back up
to 1.23," Lien said.
Economic data
Market-research group GfK's forward-looking consumer confidence
index is set to drop to 10.8 points in May
(http://www.marketwatch.com/story/german-consumer-sentiment-set-to-weaken-in-may-2018-04-26)
from 10.9 points in April, it said Thursday, as geopolitical issues
and growing protectionism are souring German consumers' mood.
(END) Dow Jones Newswires
April 26, 2018 04:35 ET (08:35 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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