European stocks and US equity futures dropped following mixed corporate earnings and as investors studied the latest assessment on the US economy for clues on the path for interest rates.
(Bloomberg) — European stocks and US equity futures dropped following mixed corporate earnings and as investors studied the latest assessment on the US economy for clues on the path for interest rates.
Autos led declines in the Stoxx Europe 600 index as Renault SA fell the most in almost five months, with concerns over pricing pressure outweighing the French carmaker’s first-quarter sales beat. Germany’s DAX underperformed as other auto- and partsmakers fell. L’Oreal SA gained after the cosmetics maker reported strong demand. Contracts for the Nasdaq 100 retreated by more than 1%. A region-wide index of Asian stocks edged lower.
The Federal Reserve’s monthly Beige Book survey released on Wednesday showed the US economy “stalled,” with narrower access to credit. Federal Reserve Bank of New York President John Williams said the recent trend of slowing inflation continues but that price gains remain too high. Trader bets continue to lean toward a rate hike next month.
A measure of dollar strength was steady, while Treasury yields dropped.
“Inflation is not going to go away by itself,” Marija Veitmane, senior multi-asset strategist for State Street Global Markets, said in an interview with Bloomberg Television. “It’s really a question of whether the Fed has enough resolve to break the economy to get inflation down and right now it seems that they still do.”
Elsewhere on the monetary policy front, European Central Bank Governing Council member Klaas Knot said the ECB may need to follow a widely expected hike next month by raising rates in June and July. “It’s too early to talk about a pause,” the Dutch central bank chief told the Irish Times newspaper in an interview published Thursday. “For a pause, I would really need to see a convincing reversal in underlying-inflation dynamics.”
Investors were also digesting mixed earnings out of the US. Tesla Inc. missed profit expectations while International Business Machines Corp. and Morgan Stanley beat forecasts.
In Asia, Taiwan Semiconductor Manufacturing Co. forecast worse-than-anticipated revenue for the current quarter, reflecting a persistent slump in demand for everything from smartphones to server chips. Apple Inc.’s most important chipmaker warned that demand from the mobile and PC industries would remain “soft” for now.
Banks in China kept loan prime rates unchanged after the People’s Bank of China stayed put. An independent review of Australia’s central bank recommended setting up an expert policy board and fewer meetings followed by press conferences.
Elsewhere in markets, Bitcoin dropped below $29,000. Oil fell while gold edged higher after a Wednesday decline pushed the precious metal below $2,000 an ounce.
The drop for US equity futures followed a flat day in New York trading. The CBOE VIX index of volatility to the lowest since 2021. A Bank of America global measure of volatility spanning stocks, rates, currencies and commodities sits at the lowest level since early 2022.
Key events this week:
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- The Stoxx Europe 600 fell 0.3% as of 9:58 a.m. London time
- S&P 500 futures fell 0.8%
- Nasdaq 100 futures fell 1.1%
- Futures on the Dow Jones Industrial Average fell 0.5%
- The MSCI Asia Pacific Index fell 0.1%
- The MSCI Emerging Markets Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0975
- The Japanese yen was little changed at 134.61 per dollar
- The offshore yuan rose 0.1% to 6.8864 per dollar
- The British pound was little changed at $1.2446
Cryptocurrencies
- Bitcoin fell 1.4% to $28,838.27
- Ether fell 1.5% to $1,950.63
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.56%
- Germany’s 10-year yield declined three basis points to 2.48%
- Britain’s 10-year yield declined two basis points to 3.84%
Commodities
- Brent crude fell 1.6% to $81.83 a barrel
- Spot gold rose 0.1% to $1,997.36 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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