US stock futures rise sharply after better than expected Goldman earnings

Wall Street stock futures rose sharply on Tuesday after Goldman Sachs became the latest corporate giant to post better than expected quarterly results.

Contracts tracking the S&P 500 and the technology-heavy Nasdaq 100 advanced more than 2 per cent ahead of the New York opening bell. Europe’s regional Stoxx 600 was up 1.2 per cent by early afternoon in London. Hong Kong’s Hang Seng closed up 1.8 per cent.

Those gains in equity markets followed a sharp rally in the previous session, with the S&P closing 2.6 per cent higher on Monday — supported by better than expected third-quarter results from Bank of America. BofA attributed its earnings to “resilient” US consumers.

Investors have been monitoring the latest flurry of corporate financial statements for signs of strain from high inflation and rising borrowing costs.

The Federal Reserve has led the charge this year on aggressively tightening monetary policy to curb rapid price growth — lifting interest rates by an extra-large 0.75 percentage points over its last three meetings to a target range of 3 to 3.25 per cent. Concerns have intensified in recent months that the Fed and its peers will turn the policy screws into a protracted slowdown.

But the early stages of the new US corporate earnings season have helped brighten sentiment. Shares in Goldman added more than 3 per cent in pre-market trading on Tuesday, after the bank reported third-quarter net income of $3.1bn, down from $5.4bn a year earlier but above analysts’ estimates of $2.9bn. Johnson & Johnson’s shares also ticked up almost 2 per cent before the bell, after the healthcare group similarly beat earnings expectations.

The strong start to the week for equity markets was also boosted by the UK government’s decision on Monday to ditch most of last month’s “mini” Budget measures, which had spooked markets and sparked a fire sale of pension fund assets.

“The UK news has again seemed to heavily influence global markets over the last 24 hours after the UK government officially announced one of the biggest U-turns in political history and ditched the bulk of what remained of their mini-budget,” wrote Jim Reid , a strategist at Deutsche Bank.

Some analysts and investors continue to see recent stock market gains as temporary. A FTSE index of global shares has fallen 25 per cent this year, closing out three straight quarters of losses in September.

“Sentiment has been really depressed,” said Kasper Elmgreen, head of equities at Amundi.

Westminster’s U-turn on its fiscal proposals, and BofA’s results, had been positive for markets on Monday. But, Elmgreen said: “We’re not seeing much that gives us renewed, [long-term] confidence. It’s natural that we have this bounce of optimism and strong days in a really challenging macro outlook.”

He added: “We are entering what could be a quarter of reckoning: this may be the quarter where earnings have to give.”

In government debt markets, the yield on the benchmark 10-year UK gilt was steady at 3.97 per cent, following a sharp rally in the previous session. The longer-dated 30-year yield slipped 0.04 percentage points to 4.42 per cent as its price rose.

The pound edged 0.2 per cent against the dollar to $1,133. Elsewhere, the yen slide through ¥149 against the greenback to hit a fresh 32-year low.

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