Markets solid as focus turns to US bank earnings

Associated Press

LONDON (AP) — Markets were solid Monday as investors shrugged off weak U.S. employment figures ahead of a slew of earnings statements from leading U.S. banks.

Last Friday's figures showing that the U.S. economy added 74,000 workers in December — the smallest increase since January 2011 — failed to have much of a market impact as many investors blamed the bad weather for the disappointment.

And at the margins, many think the figures may mean the Federal Reserve doesn't wind down its monetary stimulus as fast as many have predicted. The stimulus over the past few years has helped shore up stocks in particular as the new money created found its way into financial markets.

The Fed has been buying $85 billion of financial assets each month to force down interest rates and spur economic growth. In December, the Fed said it would reduce its purchases by $10 billion per month to $75 billion beginning this month due to an improving economy.

"The belief that Friday's numbers could see a pause in tapering until March do appear to be reflected in U.S. bond markets, with the biggest one day fall in yields in the 10 year note since September last year, closing over 11 basis points down on the day," said Michael Hewson, senior market analyst at CMC Markets.

That drop helps explain the muted reaction in stock markets as well as the weakness of the dollar.

In Europe, the FTSE 100 index of leading British shares closed up 0.3 percent at 6,757.15 while the CAC-40 in France rose the same rate to 4,263.27. Germany's DAX ended 0.4 percent higher at 9,510.17.

In the U.S., the Dow Jones industrial average was 0.1 percent lower at 16,418 while the broader S&P 500 index fell the same rate to 1,841.

The dollar fell sharply in the wake of the jobs figures and continued to be under pressure Monday, particularly against the yen. The dollar was a further 0.6 percent lower at 103.33 yen. It was holding up better against the euro, which surged Friday. Europe's single currency was down 0.2 percent $1.3643.

The focus in markets this week will increasingly turn to U.S. earnings statements over the coming weeks. This week, the banks take center stage.

"As we saw in the previous quarter, this is expected to be the best performing sector in this earnings season, which should mean earnings season getting off to a very positive start," said Craig Erlam, market analyst at Alpari.

Earlier in Asia, Hong Kong's Hang Seng index added 0.2 percent to 22,888.76 and Seoul's Kospi rose 0.5 percent to 1,948.92. China's benchmark Shanghai Composite Index shed 0.2 percent to 2,009.5. Tokyo was closed for a holiday.

Thailand's SET index gained 1.1 percent despite street protests by anti-government activists aimed at shutting down swathes of Bangkok and forcing the Thai prime minister from office. Analysts warned the Thai economy and currency could suffer if the protests continue.

View Comments (2)