European shares and US stock futures rose sharply on Thursday, as Facebook parent Meta rallied in out-of-hours trading on the back of better than expected profits.
The regional Stoxx Europe 600 index added 0.9 per cent, while futures contracts tracking Wall Street’s S&P 500 rose 1.4 per cent. Those tracking the technology-heavy Nasdaq 100 index climbed 2 per cent.
The moves came after Meta posted its slowest revenue growth since going public following the closing bell on Wednesday, but topped analysts’ earnings forecasts. The group delivered profits of $7.5bn in the January-March quarter, down more than a fifth year on year.
Meta’s shares rose 17 per cent in pre-market trading. Apple and Amazon are due to post their earnings reports after the end of Thursday’s session, with shares in both businesses little moved before the New York opening bell.
“The reporting season covers a period that is already behind us and what matters most is companies’ outlook and the visibility companies are giving for the coming quarters,” said Giuliano Gasparet, head of equity at Generali Insurance Asset Management.
“Actually it’s not so bad as everyone felt it would be. But we remain cautious as we are not confident about supply chains, for example in tech . . . this could impair earnings in coming quarters.”
Illustrating the stresses large companies are feeling from supply chain disruptions and inflation, shares in J Sainsbury were down almost 3 per cent after the UK supermarket group said it expected underlying profit in the current year to miss analysts’ forecasts due to “significant external pressures and uncertainties”, including rising costs and “the impacts” of the war in Ukraine.
Later in the day, economists expect the US to report that economic growth had slowed significantly in the first quarter, at an annualised rate of 1 per cent. That is down from a pace of 6.9 per cent in the final quarter of 2021.
In currencies, the euro weakened a further 0.5 per cent against the greenback to $1.05 after a soaring dollar helped push it to a five-year low this week.
Although the US economy is slowing, the dollar is also standing tall as the Federal Reserve prepares to tighten monetary policy aggressively to curb inflation, with chair Jay Powell having strongly signalled a 0.5 percentage point rate increase in May.
“Not only do you have the Fed hiking considerably more aggressively than central banks in other developed markets but every time you get concerns about Russia and Ukraine [the dollar] is the ultimate safe haven,” said Seema Shah, chief global strategist at Principal Global Investors.
“The Swiss franc does not work so well as a haven trade anymore as it’s in Europe,” Shah added. “The US is much less exposed to the Russia-Ukraine conflict.”
The Japanese yen weakened further on Thursday to cross the ¥130 mark against the dollar, a new multi-decade low, after the Bank of Japan vowed to keep bond yields at zero just as the Fed and other central banks prepare to raise interest rates rapidly.
In government debt markets, the yield on the 10-year US Treasury note, a benchmark for global borrowing costs, was steady at 2.81 per cent. The yield on the policy-sensitive two-year note was also flat at 2.57 per cent.
Brent crude, the international oil benchmark, slipped 0.1 per cent lower to $105.2 a barrel.