(Reuters) World stocks continued to claw back losses on Friday after spending much of the week in the red, boosted by signs of progress in US tax reform and strong corporate results.
The US House of Representatives passed a tax overhaul expected to boost share prices if it becomes law. The legislative battle now shifts to the Senate.
Despite a bounceback, however, global stocks were still on track for their second straight week of losses, their longest weekly losing streak since August.
Treasury yield curve at flattest level in a decade
The US Treasury yield curve remained on investors’ radars, reaching its flattest levels in a decade, reflecting a belief that the Federal Reserve will continue to raise interest rates.
The MSCI world equity index, which tracks shares in 47 countries was up 0.1% on the day, but was heading for a 0.1% fall on the week.
European shares were sluggish in early deals after the previous session’s strong recovery, with the STOXX 600 index falling back 0.3% as disappointing company results and downgrades weighed.
Earnings season weaker than previous quarters
As earnings season drew to a close with 90% of US and European companies having reported, analysts said results were supportive but weaker than the previous quarters.
“While they look good overall, the strong momentum apparent since Q1 is now fading,” said Societe Generale analysts, adding that consensus earnings estimates are no longer being raised for US or euro zone stocks.
Investors breathed a little easier on Friday, with high yield “junk” bond prices also recovering and market volatility easing.
US inflation likely to be subdued
But it’s been a bruising week – the US yield curve flattened for the third week in a row, global high yield bond markets were on course for a second straight week of losses (the last time that happened was a year ago) and Wall Street volatility hit its highest in three months.