A solid start to the week from Asian equities carried over to the European session which saw benchmark indices climb higher as market participants brushed aside concerns of eurozone banking risk. Corporate activity was very much the focus of the day with earnings releases and M&A activity boosting risk appetite among investors. Major European equity indices built on Friday’s tentative gains while investors grew increasingly optimistic ahead of Yellen’s Senate testimony tomorrow.
Among the headline corporate earnings releases, Citigroup posted higher than expected earnings per share, earnings $1.24 against expectations of $1.05 per share in the second quarter. Despite agreeing to a $7bn settlement with the Department of Justice which forced the bank to take a $3.8bn charge in its Q2 results, the higher than expected earnings per share excluding the one of charge saw banking sector peers rally higher as both the S&P 500 and DJIA opened higher, last trading between 0.5-0.7% up.
The bullish overtones saw investors fall out of favour with gold in spectacular fashion as prices slumped 2.4% lower today. After geopolitical unrest and violence in the Middle East saw investors rush into the perceived safe haven, supporting prices towards $1,345/oz last week, the bullish earnings outlook saw prices sell off back down towards $1,305/oz where the 100 day MA offered some temporary reprieve from further declines. Investors will be looking ahead to notable earnings from JPMorgan Chase, Johnson & Johnson, Yahoo! and Intel expected throughout the day tomorrow, with any surprise on the upside potentially spurring further gains in risk assets.