Global stocks rally as strong earnings drive optimism, with investors looking to key Fed decision ahead

• Global stocks climbed Monday, as investors continued to feel positive about the US earnings season.
• Yet major central banks look poised to start dialling down their support for economies this week.

Global stocks rose Monday as a broadly strong US earnings season gave investors a reason to start the week in an optimistic mood.

However, the bond market remained jittery as traders braced for key central bank decisions later this week, when the Federal Reserve is expected to say it will start cutting back its support for the US economy.

S&P 500 futures were up 0.42%, Nasdaq 100 futures were 0.4% higher, and Dow Jones futures rose 0.45%, indicating a higher start for US stock markets at the open later in the day.

In Asia, Tokyo's Nikkei 225 jumped 2.61% overnight after Japanese Prime Minister Fumio Kishida comfortably won the country's general election, raising hopes of a big economic stimulus. China's CSI 300 slipped 0.37%.

In Europe, the continent-wide Stoxx 600 index moved up 0.6% in early trading.

Global stocks have powered to record highs over the last two weeks on the back of a strong third-quarter earnings season, with equity investors looking past fears about an economic slowdown.

"At this point in time, more S&P 500 companies are beating [earnings per shares] estimates for the third quarter than average, and beating EPS estimates by a wider margin than average," said John Butters, senior earnings analyst at financial data company FactSet.

"The index is now reporting the third highest year-over-year growth in earnings since Q2 2010."

Earnings season continues this week, with Berkshire Hathaway, Moderna and Airbnb among the companies scheduled to report results.

However, investors remain wary that the world's most powerful central banks could soon dial down the huge amounts of monetary stimulus that have supported economies during the coronavirus crisis.

Read more: Simon Lack's 98th-percentile mutual fund attacks inflation by picking stocks that benefit from it. He shared ideas for finding inflation winners - and 11 stocks to buy now as prices surge.

The Fed is due to reveal its latest monetary policy decision on Wednesday, and it is widely expected to announce that it will start tapering, or cutting back, its $120 billion a month of bond purchases.

Meanwhile, some investors believe growing inflation pressures could push central banks to consider lifting benchmark interest rates.

Traders are betting that the Bank of England becomes the first big central bank to raise interest rates on Thursday.

Short-term bond yields - which are those most impacted by central bank policy - have risen sharply in recent weeks. Yields move inversely to prices.

The yield on the 3-year US Treasury note was 2.2 basis points higher at 0.778% on Monday, up from around 0.32% in just a month.

Longer-dated bonds have moved less sharply, however, suggesting that bond-market investors expect inflation and growth to cool over the medium term. The 10-year US Treasury yield was up 2.1 basis points to 1.577%.

US Treasury Secretary Janet Yellen on Sunday moved to quash concerns about the economy.

She told Bloomberg: "I think what we're going to see is a good, solid recovery. The unemployment rate has gone down considerably, and this is nothing like the recovery from the 2008 financial crisis."

Elsewhere in markets, oil prices rose after dipping slightly the previous week. Brent crude was up 0.93% to $84.47 a barrel, while WTI crude was 0.48% higher at $83.97 a barrel.

In the crypto world, bitcoin rose 1.7% to $62,034, slightly lower than the record high of $66,000 reached in October.