Stocks, U.S. futures advance on earnings optimism

European stocks rose to a record and U.S. index futures advanced amid earnings surprises and optimism the recovery in the world’s largest economy is on track.

European stocks rose to a record and U.S. index futures advanced amid earnings surprises and optimism the recovery in the world’s largest economy is on track.

December contracts on the S&P 500 Index climbed 0.4 per cent after the underlying gauge posted the biggest monthly gain since last November. Health-care shares rallied in Europe. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting for clues on stimulus tapering. Oil rebounded on supply concerns.

Even as bond markets react to expectations of persistent inflation, equities are surging from one record to another as corporate performance benefits from post-lockdown demand. Investors are now focusing on the Fed’s Wednesday policy decision where it might unveil the phasing out of bond purchases.

“Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalization.”

A surge in consumer demand since the reopening of economies underpins growth in earnings for U.S. and European companies. Of the 279 S&P 500 companies that have reported quarterly results, 87 per cent have met or exceeded estimates. Among members of Europe’s Stoxx 600 index, 68 per cent surpassed expectations. 

Optimism in the equity markets got a boost after U.S. Treasury Secretary Janet Yellen expressed confidence in the continuing recovery from the pandemic. She said the longer-term economic programs that President Joe Biden is pressing Congress to enact could further strengthen the rebound.