US stock futures rise sharply after better-than-expected Goldman earnings

Wall Street stock futures rose sharply on Tuesday after Goldman Sachs became the latest corporate giant to report better-than-expected quarterly results.

Contracts tracking the S&P 500 and the tech-heavy Nasdaq 100 were up more than 2 percent ahead of the opening bell in New York. Europe’s regional Stoxx 600 was up 1.2 percent through early afternoon in London. Hong Kong’s Hang Seng closed down 1.8 percent.

Those gains in equity markets followed a strong rally in the previous session, with the S&P closing 2.6 percent higher on Monday – helped by better-than-expected Bank of America third-quarter results. BofA credited its earnings to “resilient” US consumers.

Investors have been monitoring the recent spate of corporate deals for signs of a drag from high inflation and rising borrowing costs.

The Federal Reserve has led the charge this year for aggressively tightening monetary policy to curb rapid price growth — raising interest rates by an extra large 0.75 percentage point in its last three meetings to a target range of 3 to 3.25 percent. In recent months, concerns have mounted that the Fed and its peers will turn policy into a protracted slowdown.

But the early stages of the new US corporate earnings season have helped lift sentiment. Shares of Goldman were up more than 3 percent in premarket trading on Tuesday after the bank reported $3.1 billion in net income for the third quarter. Shares of Johnson & Johnson were also up almost 2 percent before the bell after the health care giant had also exceeded profit expectations.

The strong start to the week for equity markets was also helped by the UK government’s decision on Monday to scrap most of last month’s ‘mini’ budgetary measures that had spooked markets and triggered a bailout of pension fund assets.

“News from the UK appeared to have had another major impact on global markets in the last 24 hours, after the UK government officially announced one of the biggest turnarounds in political history and canceled most of its remaining mini-budget,” wrote Jim Reid , strategist at Deutsche Bank.

Some analysts and investors continue to view recent price gains as temporary. A FTSE index of global equities has fallen 25 percent this year to close three straight quarters of losses in September.

“The mood was really depressed,” said Kasper Elmgreen, head of equities at Amundi.

Westminster’s U-turn on its tax proposals and BofA results had a positive impact on markets on Monday. But Elmgreen said, “We don’t see much that renews us, [long-term] Trust. It’s natural that we have this surge of optimism and strong days in a really challenging macro outlook.”

He added: “We’re entering a quarter of reckoning: This could be the quarter where earnings have to give way.”

In government bond markets, the benchmark 10-year UK gilt yield was stable at 3.97 percent after a sharp rally in the previous session. The longer-term 30-year yield slipped 0.04 percentage points to 4.42 percent as the price rose.

The pound rose 0.2 percent against the dollar to $1.133. Elsewhere, the yen slipped through 149 yen against the dollar to hit a fresh 32-year low.