European equities tick up after Wall Street hits a fresh record

European stocks rose on Tuesday morning after surging oil prices and strong corporate updates led Wall Street to close at an all-time high in Monday’s session.

The region wide Stoxx 600 share index gained 0.6 per cent in morning dealings, while London’s FTSE 100 climbed 0.7 per cent.

The moves came after the US blue-chip S&P 500 stocks index ended the previous day up 0.5 per cent, powered by consumer cyclicals and energy companies — taking its year-to-date gains to 22 per cent. The biggest riser was Elon Musk’s Tesla, which became the first carmaker to be valued at $1tn after rental group Hertz said it had ordered 100,000 of its electric vehicles.

At the same time, US oil prices topped $85 a barrel for the first time in seven years on Monday as traders wagered that crude supplies would not keep pace with global demand, against the backdrop of a widening energy crunch that has also propelled natural gas prices skywards. West Texas Intermediate, the US oil benchmark, dipped 0.4 per cent to $83.39 a barrel.

Larry Fink said on Tuesday that it was highly probable oil would reach $100 a barrel, according to a Reuters report. The chief executive of BlackRock — the world’s largest asset manager — was speaking on Tuesday at the Future Investment Initiative conference in Saudi Arabia.

Futures markets signalled that the S&P 500 would rise 0.4 per cent in the New York morning on Tuesday. More than 300 companies quoted on the S&P 500 will deliver earnings reports in the next fortnight, constituting 59 per cent of the premium index by market value, according to analysis from Credit Suisse. Among those companies sit some of the world’s biggest tech companies, including Apple and Microsoft.

Facebook’s shares closed 1.3 per cent higher on Monday after it posted third-quarter figures late in the day, reporting sales of $29bn — just below consensus forecasts — and net income of $9.19bn. Chief executive Mark Zuckerberg explained that the social media group would now prioritise younger users after leaked documents showed its popularity was waning among under-30s.

In Asia, Hong Kong’s Hang Seng share index closed down 0.4 per cent in afternoon trading on Tuesday — damped by real estate stock declines as it emerged that Chinese developer Modern Land had missed a payment on a dollar bond worth $250m, in the latest signs of troubles in China’s property sector.

Real estate had long been the growth engine behind the country’s economy but in recent weeks the industry has been hit by government curbs on speculation and a liquidity crisis at heavily indebted Evergrande, which narrowly avoided a potential default last week.

Elsewhere, in government debt markets, the yield on the US 10-year Treasury note was flat on Tuesday morning at 1.62 per cent. The yield on the UK gilt equivalent dropped 0.03 percentage points to 1.11 per cent. Bond yields move inversely to their prices.

Traders globally are primed for announcements about monetary policy tightening and the tapering of pandemic-era bond-buying programmes, as governments respond to persistent inflationary pressures. The European Central Bank is due to meet on Thursday, while the US Federal Reserve and the Bank of England will meet next week.

In currencies, the Turkish lira edged up slightly against the US dollar to TL9.6 after hitting fresh lows on Monday, as President Recep Tayyip Erdogan backed down from a threat to expel 10 western ambassadors. The lira had already lost almost a quarter of its value since early January.

What else to watch in markets today

Energy: EU energy ministers meet in Luxembourg to discuss the increase in energy prices. The soaring cost of fuel prompted the EU energy commissioner to propose a reform of the gas market. Norway’s newly elected prime minister, Jonas Gahr Store, told the FT that his country was helping in the current crisis and was also looking at ways to be part of the EU’s transition to a carbon neutral economy.

EU: The European Central Bank will release its quarterly eurozone bank lending survey, which provides information on lending conditions in the euro area. The supply of bank loans to eurozone businesses stabilised after the lifting of most lockdown measures during the second quarter, but disruptions to the global supply chain led to a slowdown in business activity in October.

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