Global Markets: Stocks struggle as soft earnings compound interest rate headache

Applied Energetics

25/10/2023 16:33

(Updates to midday U.S. trading)

        * 
      Mixed earnings raise concern about economy
    

        * 
      Google shares drop, Microsoft up after results
    

        * 
      10-year Treasury yields, U.S. dollar tick up
    

        * 
      China unveils 1 trillion yuan bond issue, Asian shares
flat
    

  
    By Lawrence Delevingne
       Oct 25 (Reuters) - Stocks were mixed on Wednesday after
the latest round of earnings prompted concern among investors
over the economic outlook, adding to the angst over painfully
high interest rates, while benchmark U.S. Treasury yields and
the dollar ticked up. 
    Weighing on the indexes were shares in Alphabet  GOOGL.O ,
which fell 8.7% after the company reported another slowdown in
its cloud business, while Microsoft  MSFT.O  shares rose 2.3%
after it beat estimates. 
    The Dow Jones Industrial Average  .DJI  rose 0.1% to 33,175,
the S&P 500  .SPX  lost 0.64%, to 4,220 and the Nasdaq Composite
 .IXIC  dropped 1.23%, to 12,978.
    "Tech earnings got off to a mixed start last night thanks to
a focus on cloud computing, one of the big money spinners for
the sector," Chris Beauchamp, IG Group chief market analyst,
said.
    "Stocks have picked up somewhat in the past 24 hours, but
it’s now up to Meta tonight and Amazon tomorrow to provide the
kind of good news that might give stocks a reason to rally into
month-end." 
    In Europe, the STOXX 600  .STOXX  was little changed, after
coming under pressure from a near-60% slump in shares of
Worldline  WLN.PA  after the French payments company cut its
financial targets. In a heavy day for bank earnings, Deutsche
Bank  DBKGn.DE  was an outlier, with a 7% rise in its shares.
    Overnight, Asian stocks rose from 11-month lows as investors
cheered China's approval of a 1 trillion yuan ($137 billion)
sovereign bond issue as a harbinger of stimulus, although MSCI's
broadest index of Asia-Pacific shares outside Japan
 .MIAPJ0000PUS  were little changed. 
    The MSCI All-World index  .MIWD00000PUS  fell 0.4%, heading
for a third straight monthly decline in October, with a loss of
2.3%, largely as a function of the surge in U.S. Treasury
yields.
    
    HIGH RATES, MIXED DATA
    U.S. Treasuries held onto a bounce-back after the 10-year
yield  US10YT=RR  breached 5% on Monday. The 10-year note last
yielded 4.908%, up 6.8 basis points.
    The interest rate on the most popular U.S. home loan last
week jumped to the highest since September 2000 - 7.9% - driving
mortgage applications to a 28-year low, a survey showed on
Wednesday. 
    Separately, fresh data on U.S. business output showed higher
levels in October, as the manufacturing sector pulled out of a
five-month contraction on a pickup in new orders, and services
activity accelerated modestly amid signs of easing inflationary
pressures.
    Strategists at Citi said the Purchasing Managers Index data
was "yet another sign that a recession is not imminent."
    "We continue to think the US economy will enter recession
next year, but in the meantime, risks are balanced toward
further Fed hikes, rather than cuts," they wrote in a note
Wednesday.
    Several of Wall Street's biggest names called a top on
longer-dated Treasury yields, including strategists at UBS and
investor Bill Ackman.
    In currency markets, the dollar index  =USD , the yen
 JPY=EBS  and the euro  EUR=EBS  were little changed on the day.
    Oil prices dipped on Wednesday as demand worries stemming
from gloomy economic prospects in Europe offset concerns about
war escalating in the Middle East. U.S. crude  CLc1  fell 1% to
$82.90 per barrel and Brent  LCOc1  was at $87.49, down 0.66% on
the day.
    The United States and Russia were among several nations
pushing for a pause in fighting between Israel and Hamas to
allow aid into the besieged Gaza Strip.
    After touching $1,997 an ounce last week, spot gold  XAU= 
traded at $1,973.
    Bitcoin is up about 29% this month mostly thanks to recent
speculation that ETF applications from BlackRock and others will
succeed and drive capital into cryptocurrencies. Bitcoin  BTC= 
last bought $34,744.
    The U.S. Securities and Exchange Commission has declined to
comment on the speculation.

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World FX rates YTD    http://tmsnrt.rs/2egbfVh
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 (Reporting by Lawrence Delevingne in Boston and Amanda Cooper
in London. Additional reporting by Tom Westbrook in Singapore;
Editing by Sharon Singleton and Mark Potter)
 ((lawrence.delevingne@tr.com))
 
((To read Reuters Markets and Finance news, click on 
https://www.reuters.com/finance/markets))