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OVERNIGHT DEVELOPMENTS
Investors plowed into European stocks, the euro and a broad spectrum of so-called risky assets Monday as results from the first round of French presidential elections eased concerns about the future of the eurozone.
The Euro Stoxx 50 index of eurozone blue-chips climbed 3.9%, as a jump in bank shares put it on track for its best day in nearly two years. Futures on the VSTOXX, which measure the cost of insuring against swings in Europe’s stocks, fell over 15%.
France’s CAC-40 index surged 4.5%, on track for its highest close since 2015, while Germany’s benchmark DAX index added 3%, on pace to notch a fresh record, according to FactSet.
Independent centrist Emmanuel Macron won the first round of Sunday’s vote in France, knocking leftist Jean-Luc Mélenchon and conservative François Fillon out of the running. Mr. Macron will compete against National Front leader Marine Le Pen, who campaigned to take France out of the euro, in the second round on May 7.
The euro was recently up 1.3% at $1.0865 after touching a five-month high on Sunday. Eurozone bank shares, which were seen as vulnerable to a victory for euroskeptic candidates Ms. Le Pen or Mr. Mélenchon, jumped on Monday. Shares in France’s Société Générale and Crédit Agricole were up by close to 10%, while Italian lender UniCredit added 10.7% and the wider eurozone banking sector was up 6.7%, poised for its best day in a year.
Futures are pointing to a 1.1% opening gain for the S&P 500, with bank stocks leading gains in pre-market trading. The Dow Jones Industrial Average is poised to add over 200 points.
BREAKFAST BRIEFING
Just as enthusiasm for the Trump administration’s pro-growth policies has waned among investors, so too has discussion of the president and his agenda among corporate executives and Wall Street analysts.
Eight out of the first 25, or 32%, of S&P 500 companies that reported first-quarter results have mentioned or discussed the new administration, according to John Butters, senior earnings analyst at FactSet. That compares with 16, or 67%, that did so at the same point during the fourth-quarter reporting period.
Investor optimism spiked after Election Day for the Trump administration’s plans to cut taxes, reduce regulations and spend on infrastructure. Shares of small stocks, financials and industrials, groups thought to benefit the most from such policies, surged into the end of 2016. That excitement made its way in to fourth-quarter earnings calls. Analysts, trying to determine what impact the Trump administration’s agenda would have on corporate bottom lines, peppered executives with questions.
In recent months, however, those corners of the stock market that initially took off have fallen to the back of the pack. The change has coincided with a failed Republican-led effort to overhaul health care, which pushed back the timeline for the implementation of other policies.
Taxes remain the most talked about policy in earnings calls, though the topic has come up four times this earnings season, compared with seven at this point during the fourth quarter’s reporting period. Infrastructure spending, or the word “stimulus,” has yet to come up at all.
Policies such as trade restrictions are also coming up less, likely indicating that executives and analysts increasingly don’t expect the protectionist rhetoric to translate into policy soon.
DAILY FACTOID
On this day in 1990, Michael Milken, former king of junk-bond underwriting, pleads guilty to five technical counts of violating securities laws.
MONEYBEAT PODCAST
The Wall Street Journal’s Josh Mitchell joins Paul Vigna and Stephen Grocer to preview what’s on tap for this week’s economic calendar with a look at more earnings reports, new housing data and a highly anticipated first quarter GDP report.
Subscribe to the MoneyBeat podcast at wsj.com or on iTunes.
KEY EVENTS
8:30 a.m.: Chicago Fed National Activity Index [Prior: 0.34; Consensus: 0.3]
A weighted basket of 85 indicators measuring four broad categories of the economy, the index is meant to provide a snapshot of national economic activity and inflation pressures. In February, it showed that economic activity across the U.S. rose.
10:30 a.m.: Dallas Fed Manufacturing Survey for April [General Business Activity Index — Prior: 16.9; Consensus: 15.0; Production Index — Prior: 18.6]
The Dallas Fed’s production index, a key measure of manufacturing conditions across Texas, rose in March for the ninth straight month.
STOCKS TO WATCH
C.R. Bard is up 20% before the bell after Becton Dickinsonreed to pay $24 billion in the latest combination of medical-supplies manufacturers.
Hasbro shares are up 4.1% in premarket trading after profit and sales surpassed expectations.
Halliburton shares are up 1.3% after the energy services group topped earnings estimates.
TODAY’S VIDEO
President Trump’s job approval has fallen, according to the latest WSJ/NBC News poll. More than half of Americans—some 54%—disapprove of the job he is doing as president, compared with 40% who approve, a 14-point gap that is wider than February’s 4-point difference. WSJ’s Aaron Zitner breaks down other findings from the poll.
MUST READS
Macron, Le Pen Outcome Offers Encouragement for EU: Emmanuel Macron and Marine Le Pen look headed for the May 7 presidential runoff. A win by Mr. Macron would strengthen the conviction of Europe’s mainstream politicians that they can beat back anti-EU nationalists such as Ms. Le Pen.
French Election Results Let Markets Breathe—For Now: With political risk receding, Europe will look more attractive for investors than it has for some time.
Disapproval of Trump Grows in Latest Poll: A new poll finds more than half of Americans disapprove of President Donald Trump’s job performance, with opinion on his handling of the economy about evenly split.
Trump’s Push for Funding for Border Wall Muddies Budget Talks: Less than a week before the government could run out of money, President Trump wants any spending deal to include some funding for a border wall, despite little appetite among congressional Republicans for risking a partial shutdown over the issue.
Malaysia’s 1MDB, Abu Dhabi State Fund Reach Repayment Agreement: State investment fund 1Malaysia Development Bhd. agreed to pay $1.2 billion to settle part of its dispute with Abu Dhabi’s sovereign fund, a move that could ease tension between the two funds and avoid arbitration proceedings.
How an ETF Gold Rush Rattled Mining Stocks Around the World: Unruly trading in the shares of some small gold companies is rekindling investor concern about the pressure that fast-growing passive funds can exert on the stocks they are meant to track.
Cheaper Mortgages Could Spur Housing Market: Mortgage rates dropped below 4% for the first time since November, providing more kindling to an already hot housing market as the crucial spring selling season gets under way.
Flood of Dollar Debt Could Come Back to Haunt Emerging Economies: Emerging-market companies are binging on U.S. dollar debt and that could become a source of trouble in some parts of the world if growth slows, interest rates rise or the dollar resumes its ascent.
CHART OF THE DAY
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April 24, 2017 at 05:33PM
from Chris Dieterich
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