A slight decline in European equities and US market index futures as investors brace for vital earnings releases from a number of big tech companies.

Tuesday saw a decline in European equities and US market index futures as investors braced for significant earnings releases from a number of prominent tech companies and examined generally dismal business activity data from Europe.

The euro's four-day winning run came to an end as European bonds rose following recent business activity data, while better than anticipated, revealed persistent weakness in both the euro union and Britain.

The region's Stoxx 600 Index reversed an early gain to close in the negative, as US equities futures moved down following the Nasdaq 100's tech-heavy greatest two-day gain since November.

This week, a flood of US corporate results from tech tycoons like Microsoft Corp. and Texas Instruments Inc. as well as industrials like GE will put the year-to-date recovery in risk assets to the test.

While some traders are preparing for the biggest tech earnings collapse since 2016, others are optimistic that certain businesses will avoid a larger slump. Microsoft, for example, is expected to announce the weakest revenue gain in six years.

“Earnings are everything” according to Peter Kinsella, director of FX strategy at asset management UBP. “Given the high levels at which stocks are now trading, any earnings let-down would be justification for a decline in stock prices”.

As the Federal Reserve nears the conclusion of its rate-hiking cycle, Kinsella claimed there is room for bonds to rise and that the dollar, which has already fallen 1.7% versus a basket of competitors this year, has likely reached its top. At its upcoming meeting, the US central bank is anticipated to lower rates by a lesser 25 basis points.

On Monday, the dollar stayed steady versus a basket of currencies slightly near nine-month lows, while the euro declined against the dollar for the first time in five sessions. German and British 10-year government bond yields decreased, with the latter being hampered by a particularly subpar assessment of business activity.

The 10-year rates decreased because of the eurozone bond rally seeping into Treasury markets.

Kinsella said, "The market is saying inflation is over and done with, which warrants a change in tone from the Fed. Overall, I disagree with the assertion that last year was the multi-year dollar top.”

(Bloomberg.com)