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

Applied Energetics

25/10/2023 21:27

(Updates to U.S. market close)

        * 
      Google results raise concern about economy
    

        * 
      10-year Treasury yields, U.S. dollar advance
    

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

        * 
      Brent crude gains 2% amid Middle East conflict fears
    

  
    By Lawrence Delevingne
       Oct 25 (Reuters) - Stocks slipped 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. 
    Shares of Alphabet Inc  GOOGL.O  plunged nearly 10% after
the Google parent reported disappointing cloud services revenue,
reviving fears of an economic slowdown and dragging down the
broader communication services sector  .SPLRCL .
    The Dow Jones Industrial Average  .DJI  finished down 0.32%,
the S&P 500  .SPX  lost 1.43% and the Nasdaq Composite  .IXIC 
dropped 2.43%.
    "The market is focused on the mega tech names to underpin a
viable rally, and yesterday's disappointment with Alphabet's
earnings report is viewed as a potential harbinger of perhaps
more disappointment," Quincy Krosby, chief global strategist for
LPL Financial in Charlotte, said in an email.
    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 8% 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 1%, heading
for a third straight monthly decline in October, with a loss of
2.95%, 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 4.949%, up 10.6 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 big names on Wall Street called a top on
longer-dated Treasury yields, including strategists at UBS and
investor Bill Ackman.
    In currency markets, the dollar index  =USD  gained 0.27%, a
near 1-week high against a basket of currencies, while the yen
 JPY=EBS  was steady versus the dollar and the euro  EUR=EBS 
fell 0.2% on the day.
    Oil prices settled up about 2% on Wednesday, buoyed by
worries about conflict in the Middle East, but gains were capped
by higher U.S. crude inventories and gloomy economic prospects
in Europe. 
    Israel is preparing a ground invasion of Gaza, Prime
Minister Benjamin Netanyahu said on Wednesday, while Israeli
shelling killed more Palestinian civilians and international
pressure grew to deliver aid and to safeguard hostages held by
Hamas.
    In Washington, the U.S. House of Representatives elected
Republican Mike Johnson, a conservative with little leadership
experience, as its speaker on Wednesday after a turbulent three
weeks that left the rudderless chamber unable to respond to the
Middle East crisis or carry out any of its basic duties.
    Jamie Cox, Managing Partner for Harris Financial Group in
Richmond, said with Johnson's election, "all eyes" are now on
Nov. 17, by when additional funding is needed to keep the
government open. 
    "Unfortunately, the only thing that really came out of the
Speaker debacle was a 45-day delay to a government shutdown
which has been in the cards since the deal to avoid the debt
ceiling," Cox said in an email.
    
    GOLD, BITCOIN GAIN
    After touching $1,997 an ounce last week, spot gold  XAU= 
traded at $1,979, up 0.5%.
    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 $34,794.

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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 Mark Potter, Diane Craft and Alistair Bell)
 ((lawrence.delevingne@tr.com))
 
((To read Reuters Markets and Finance news, click on 
https://www.reuters.com/finance/markets))