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US bank earnings drive global stock markets

by LLB Finance Reporter
19th Apr 23 6:02 am

Stock markets in the US and Europe were driven by positive US earnings and strong economic data in China.

The data brings a more optimistic tone to weeks of uncertainty and concerns as traders concentrated on the potential developments in the US monetary policy.

Ahmed Negm, Head of Market Research MENA at XS.com said, “Traders have been following the start of the earnings season in the US where the banking crisis left a number of concerns about the sector’s health. The failures of SVB and Signature Bank have fueled worries among investors that banks could be exposed to a flight in deposits.

“The publication of strong earning figures among the largest banks in particular has served in alleviating these concerns and could help drive the market to higher values. The improving sentiment regarding the banking sector could also overflow to other market segments.

“Some US banks have missed estimates and could pull the market down to a certain extent. Other large banks are expected to reveal their results in the following days which could fuel some volatility.

“European banks have also followed their American counterparts to the upside as banking concerns retreated and as the European Central Bank could move toward smaller interest rate increments. The latter could give the market more breathing room on top of strong earnings from some major European companies.

“The luxury sector in France has shown strong earnings and could consolidate its gains thanks to the positive economic data in China which recorded stronger-than-expected GDP growth rates. The country is an important market for French luxury products manufacturers as well as German auto manufacturers. The latter could find support in a stronger recovery in China.

“Global stocks could also see a more protracted uptrend as markets price in the potential stance of the Federal Reserve on monetary policy. While the central bank is expected to raise interest rates at their next meeting, the institution could soften its policy thereafter, pausing hikes and eventually reducing rates later in the year.”

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