Global Stocks Rise as Earnings Season Approaches

Global equity markets extended their rally on Tuesday, with European stocks leading the charge as investors grew more optimistic ahead of the upcoming earnings season. The pan-European STOXX 600 index rose 1%, marking its third straight session of gains. Meanwhile, Nasdaq futures and S&P 500 futures added about 0.2% after a technology-driven surge propelled the Nasdaq to a record close on Monday. Third-quarter earnings season is set to begin next week, with Goldman Sachs estimating a 27% growth in S&P 500 earnings, largely driven by AI infrastructure spending. Nvidia, the world's most valuable company and a key player in the AI sector, rose 1% in premarket trading, nearing a market value of $5.8 trillion.

Bond markets showed signs of stabilization after last week's turmoil. France's 10-year bond yield fell 9 basis points to 4.77%, retreating from its highest levels since the 2000s. However, yields remained near multi-year highs as investors continued to grapple with inflation and debt concerns. The premium for holding French 10-year bonds over safer German debt narrowed to 129.79 basis points, down from its highest level since the euro zone debt crisis in 2011. German 10-year bond yields, the euro zone benchmark, dropped 5 basis points to 3.44%. Long-dated US Treasury yields also eased after touching fresh 24-year highs overnight.

The euro rose 0.2% to 1.1239 after hitting a 17-month low overnight, though concerns about the euro zone's fiscal outlook persisted. A selloff in French bonds, triggered by last week's unpopular budget proposal, showed signs of spreading across the euro zone. Political uncertainty increased after Spanish Prime Minister Pedro Sanchez called a snap election on Monday. James Klempster, deputy head of multi-asset at Liontrust in London, noted that while there was pressure on government bonds, the corporate side looked robust, with earnings expectations remaining high.

Commodities also saw shifts, with Brent crude falling 0.4% to $99.91 a barrel after a 1.9% drop overnight. Resilient Middle East crude exports and a G7 emergency stockpile release eased supply concerns, though ongoing security risks limited losses. Most Asian markets rose, with Japan's Nikkei gaining 1.1% and Hong Kong's Hang Seng index adding 0.7%, while South Korean shares fell nearly 1% after reopening following a holiday. The dollar weakened broadly against most major currencies, with the dollar index falling 0.16% to 101.99 after a 3.5% rise over the past month. Spot gold rose 0.3% to $4,152.97 an ounce.