Europe: Stocks steady at open as earnings watched

[SYDNEY] European stocks opened steady and US index futures rose as investors weighed earnings reports to assess the strength of the economic recovery. Shorter-term Treasury yields rose faster than longer-term ones.

The Stoxx Europe 600 Index slipped less than 0.1 per cent as better-than-estimated results for companies from Anheuser-Busch InBev to Dufry cushioned the impact of concerns over elevated inflation. Futures contracts on the S&P 500 Index advanced 0.1 per cent. The 10-year Treasury rate climbed 1 basis point, while the 2-year yield added 4 basis points.

Flatter sovereign-yield curves are highlighting growth worries as price pressures stoked by an energy crunch and supply-chain snarls push central banks towards paring accommodation. Australia's sovereign yields surged after the monetary authority opted against defending its yield target, spurring speculation about a possible policy shift.

Global stocks are still near all-time peaks, supported by a robust corporate earnings season so far. The risk is sentiment could weaken if investors lose confidence in the ability of policy makers to contain inflation while nurturing the economic rebound. The resilience of the Nasdaq 100 overnight and tumble in US small-cap shares hinted at doubts about the so-called reopening trade.

There seems to be "less confidence that the Fed will be able to thread the needle and neither end up behind the curve with its taper timeline/gradual hikes nor ahead of the curve if it reacts too quickly", Jonathan Cohn, head of rates trading strategy at Credit Suisse, wrote in a note.

Investors are awaiting the European Central Bank policy meeting as well as a report later Thursday on US economic growth, which is likely to show a cooling recovery. The Bank of Japan left its main policy settings unchanged.

BLOOMBERG