“The start of the U.S. earnings reporting season is affording a general sense of relief for equity investors, as Citigroup’s number came in better than expected The improved risk sentiment was evident in a softer yen, as the dollar pushed higher against the safe haven currency. The greenback added 0.2% on Monday, putting it closer to the Yen102 level that it has traded around in recent weeks, and was last at Yen101.63.
The weaker yen supported stocks in Tokyo, with the Nikkei Stock Average last up 0.9%. Elsewhere in Asia, South Korea’s Kospi gained 0.8% and Australia’s S&P/ASX 200 added 0.4%. Stocks were rising, adding to gains made on Monday, ahead of a number of upcoming data releases. The most significant for Asia will be China’s second-quarter growth data, due on Wednesday, which is expected to come out at 7.4% on year–putting it in line with the level of growth seen in the first quarter.
On Tuesday, the Bank of Japan will wrap up its two-day policy meeting, with the focus on Governor Haruhiko Kuroda’s news conference. Also on the central bank front, minutes from the Reserve Bank of Australia’s July board meeting are scheduled for release. Stocks pushed higher, as better-than-expected earnings from Citigroup Inc. helped major benchmarks recover from last week’s swoon.
The Dow Jones Industrial Average climbed 111.61 points, or 0.7%, to 17055.42. The blue-chip index forged a record in intraday trading though fell short of closing at a record high. The S&P 500 index tacked on 9.53 points, or 0.5%, to 1977.10. The Nasdaq Composite Index added 24.93 points, or 0.6%, to 4440.42.
Financial stocks climbed, with shares of Citigroup rising 3.1% to a one-month high after the bank said it agreed to pay $7 billion to settle allegations by the U.S. government about the quality of mortgages it sold leading up to the financial crisis.
The bank also reported that its second-quarter profit tumbled 96% due to a charge related to the settlement. Stripping out the charge, the results topped Wall Street estimates. The gains lifted the S&P 500 Financial sector index 0.6%.
Monday’s rally follows losses across the stock market last week, amid jitters over the financial health of a Portuguese bank. The S&P 500 and Nasdaq Composite dropped the most since April, while the Dow posted its biggest weekly loss in a month.
Financial shares in particular have been hit hard recently. Big banks have been hit by litigation costs and a downturn in once-lucrative trading businesses, while a weak mortgage market has crimped lenders. The financial sector index is up 4.4% year to date, trailing the 7% gain in the broader S&P 500.
Despite Monday’s recovery, shares of Citigroup are down 7% this year and 2.3% from a recent high in early June.
Financial company fortunes aren’t expected to improve soon. Analysts expect second-quarter earnings in the sector to decline 4.2%, according to FactSet, on top of a 2.6% drop in earnings in the first three months of the year. Second-quarter earnings for the broader S&P 500 are expected to rise 4.5%.