Earnings Give Stocks a Bump

By Riva Gold and Ese Erheriene 
   -- Netflix shares jump in premarket trading 
 
   -- Asian tech under pressure following ZTE action 
 
   -- Sterling around post-Brexit high 

U.S. stock futures and European shares climbed Tuesday with support from strong corporate results, even as warnings from Western governments over a Chinese telecommunications-equipment giant put pressure on Asian markets.

The Stoxx Europe 600 edged up 0.4% after Wall Street closed higher Monday in the lowest-volume day so far this year. Stock futures pointed to continued gains in the U.S. later Tuesday, with S&P 500 and Dow Jones Industrial Average futures up 0.4% and 0.5%, respectively.

Helping boost sentiment around U.S. stocks, Netflix shares jumped 7% in premarket trading after reporting subscriber growth that beat its own forecast and analysts' expectations.

"The FANGs [ Facebook, Amazon.com, Netflix and Alphabet] are very important; they seem to be a barometer for all stocks," said Christopher Peel, chief investment officer at Tavistock Investments. In light of recent pressure on technology companies, "the tech sector is vulnerable to a selloff if any of the big five or six companies have a miss [on earnings]," he said.

Results from Netflix are also the first real gauge of whether world-wide demand picked up in the first quarter, said JJ Kinahan, chief market strategist at TD Ameritrade. "You really want to hear that tech stocks are doing well, and seeing demand and growth world-wide," he said.

The video-streaming giant said it added 7.41 million subscribers in the first quarter, including 5.46 million internationally.

Still, many analysts expect the wider first-quarter earnings season to offer only a limited boost to the equity market, in light of high expectations and continued uncertainty about trade and tensions around Russia and Syria.

"The early take is things are good...but there's a lot of nervousness going forward because the geopolitical scene is a constantly changing one," said Mr. Kinahan.

Chinese technology shares fell sharply Thursday after the U.S. and U.K. took warned against Chinese telecom-equipment heavyweight ZTE and the U.S. Commerce Department banned companies from selling products to ZTE, saying the company violated the terms of a deal last year settling allegations of sanctions busting involving North Korea and Iran.

ZTE is a maker of smartphones, and the prospects of the company seeing reduced business hit stocks of Asian companies in the supply chain.

Hong Kong's Hang Seng Index gave up earlier gains to fall 0.8% in late trading while Taiwan's Taiex Index fell 1.3%. Taiwan Semiconductor, the island's largest company, ended down 2.3%.

In Hong Kong, component makers Sunny Optical and AAC Technologies fell 5.8% and 4.6%, respectively. ZTE, which is listed in Hong Kong, didn't trade Tuesday, though Jefferies slashed its stock target by more than half.

The Shanghai Composite Index closed down 1.4% while the startup-heavy ChiNext Price Index in Shenzhen shed 3%.

The declines came despite a temporary boost for stocks after China released better-than-expected economic growth figures to start 2018.

China's gross domestic product increased 6.8% from a year earlier in the first quarter, beating expectations slightly and equaling 2017's growth. March retail sales also rose slightly more than analysts expected, though industrial-production growth fell short.

Elsewhere in Asia, Japan's Nikkei Stock Average edged up 0.1%.

In Europe, shares of Associated British Foods rose 4.3% after the Primark owner released profit figures and left its outlook for the full year unchanged.

The multinational-heavy FTSE 100 lagged slightly behind after grappling with a strengthening British pound to start the week. A stronger U.K. currency typically means corporate earnings generated overseas are worth less translated back into pounds.

Sterling was last down 0.2% at $1.4319 after settling Monday at its highest afternoon level against the dollar since the U.K. referendum in June 2016.

While European shares have struggled with a stronger euro and British pound this year, U.S. companies benefited in the first quarter from a weaker dollar. Of the S&P 500 companies that reported results through Monday, 60% discussed a positive impact from foreign-exchanges rates, according to FactSet.

Write to Riva Gold at [e-mail] and Ese Erheriene at [e-mail]

(END) Dow Jones Newswires

April 17, 2018 06:55 ET (10:55 GMT)

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