European stocks declined as investors parsed a flood of earnings reports from some of the region’s biggest companies.
(Bloomberg) — European stocks declined as investors parsed a flood of earnings reports from some of the region’s biggest companies.
The Stoxx Europe 600 index dropped about 0.5%, with Swiss lender UBS Group AG dragging banks lower after results that fell short of analysts’ expectations. Spain’s Banco Santander SA slid as concern over outflows outweighed a first-quarter earnings beat. US equity futures declined after First Republic Bank’s results reignited concerns about prospects for its business after weeks of calm in the banking sector.
In other earnings news:
- Swiss food producer Nestle SA advanced after posting healthy revenue growth
- Freight operator Kuehne + Nagel International AG jumped after a strong sea-logistics performance
- Drugmaker Novartis AG rose after first-quarter earnings exceeded analysts’ expectations
- Engineering firm ABB Ltd. climbed after raising revenue guidance for the year
- Swedish miner and smelter Boliden AB slumped, pulling the basic resources sub-index lower, after disruptions and rising costs at its mines unit weighed on earnings
Contracts on the S&P 500 and the Nasdaq 100 traded about 0.5% lower. The S&P 500 closed just 0.1% higher on Monday and the tech-heavy Nasdaq 100 slipped 0.2%. That extended to seven the number of trading days when the two indexes have both moved less than 1%. Heavyweights including Microsoft Corp. and Alphabet Inc. will report results later Tuesday.
A Bloomberg gauge of the dollar erased an earlier decline and Treasuries extended gains after 10-year yields slid eight basis points Monday, the biggest one-day decline since March. Government bonds across Europe rallied, with the German 10-year yield falling as much as eight basis points.
Shares in China and Hong Kong tumbled, with the Shanghai Shenzhen CSI 300 Index falling for a fifth day and the Hang Seng China Enterprises Index headed for its lowest close in five weeks. Traders cite geopolitical tensions such as the US plans last week to limit investments in key parts of China’s economy, while Chinese President Xi Jinping and other top leaders have highlighted risks the economy still faces.
Meanwhile, markets are now pricing in the peak for US interest rates in June, and then a decline to end the year below 4.5%.
The small shifts in Fed projections underscore the lack of direction at the start of a busy week for economic data and corporate earnings. Data published Monday showed US manufacturing data was weaker than economists forecast, while uncertainty over the debt ceiling persisted. Later this week, US GDP data is forecast to reveal slower growth, and the so-called core PCE deflator, the Fed’s preferred inflation gauge, is expected to show price growth cooled.
“The data justifies a 25 basis-point hike,” said Erick Muller, head of product and investment strategy at Muzinich & Co. in London. “But it’s going to be difficult for central banks to raise rates and then quickly within a few months to start reversing that.”
The CBOE VIX index of equity volatility remained near the 17-month low reached last week, but JPMorgan Chase & Co. strategist Marko Kolanovic said that may spell trouble for stock investors as it gives a false sense of calm.
Investors should remain stay defensive despite the current low volatility, according to Altaf Kassam, head of investment strategy & research EMEA at State Street Global Advisors. “Over the medium to long term, inverted yield curves, slowing consumer spending and tightening in credit standards will all take their toll,” he said on Bloomberg Television.
Some better-than-expected Chinese data in recent days haven’t been enough to bolster investor sentiment in the equity market.
“People question the accuracy of the macro data, as bottom-up corporate earnings and guidance remain soft,” Bank of America Corp. strategists including Winnie Wu wrote in a research note. “We expect the debate on the bull/bear case to continue, and market may only get more clarity by June/July.”
Elsewhere, oil steadied and gold rose. Bitcoin slid for a third day.
Key events this week:
- US new home sales, consumer confidence, Tuesday
- Australia CPI, Wednesday
- Sweden rate decision, Wednesday
- Eurozone economic, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Bank of Japan meets on interest rates, Friday
- Euro-area GDP, Friday
- US personal income, Friday
Earnings highlights:
- Tuesday: Pepsi, General Motors, General Electric, McDonalds, Microsoft, UPS
- Wednesday: Boeing, Meta, Hilton
- Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.5% as of 8:55 a.m. London time
- S&P 500 futures fell 0.5%
- Nasdaq 100 futures fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.4%
- The MSCI Asia Pacific Index fell 0.6%
- The MSCI Emerging Markets Index fell 1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to $1.1029
- The Japanese yen was little changed at 134.21 per dollar
- The offshore yuan fell 0.3% to 6.9271 per dollar
- The British pound fell 0.2% to $1.2462
Cryptocurrencies
- Bitcoin fell 0.7% to $27,277.21
- Ether fell 1.3% to $1,816.08
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.45%
- Germany’s 10-year yield declined six basis points to 2.45%
- Britain’s 10-year yield declined five basis points to 3.73%
Commodities
- Brent crude rose 0.2% to $82.92 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika, Tassia Sipahutar and Sujata Rao.
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