Markets

Market shocks as geopolitics. Add to the technical upheavals: Markets are breaking

(Bloomberg) — U.S. stock futures fell on Wednesday after tech giant Microsoft Corp. and a number of other major companies forecast slower earnings and fears grew that Berlin’s decision to approve the re-export of German tanks would trigger an escalation in the war in Ukraine.

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Nasdaq 100 contracts fell more than 1%, after a two-day rally in the underlying index was halted on Tuesday when Microsoft warned of slowing revenue growth in its cloud computing business. Earnings reports from companies like 3M Co. and chip maker Texas Instruments Inc. they also heightened concerns about the health of corporate America and heightened investor jitters as they await updates from the likes of Tesla Inc. and IBM Corp.

In U.S. premarket trading, shares of Microsoft and other tech names such as Salesforce Inc., Tesla Inc. and Amazon.com extended the decline, while the European stock index Stokk 600 also weakened. Shares in major European software firms such as SAP SE and Sage Group Plc. feeling the heat on Microsoft and Dutch chip tool maker ASML Holding NV falling after posting a profit miss.

Weak earnings prospects, fears of a US recession, as well as a potential escalation in the Ukraine-Russia war, all contributed to the market’s pullback, according to Kenneth Brooks, a strategist at Societe Generale. “The market is definitely concerned about slowing earnings growth, especially in tech, so there’s a sense that the market wants to continue to sell tech and the dollar,” Broke said. “But the big risk now is what is happening in Ukraine, if there is an escalation of the conflict and Europe is drawn into the conflict.”

Those concerns weighed on the euro, sending it lower against the dollar for the first time in six sessions. It fell even after a survey by Germany’s Ifo institute showed “significantly less pessimistic expectations” in January, adding to other data that suggested the euro zone could avoid recession.

German 10-year bond yields fell by four basis points.

The dollar ratio remained roughly steady as the euro, yen and pound retreated and global market sentiment worsened.

If further hostilities with Russia do not materialize, the dollar’s downtrend will continue as the Federal Reserve is expected to end its policy tightening cycle in the coming months and recent data, including business activity data on Tuesday, point to a looming recession. .

The pound was hit by data showing a sharp fall in factory costs, fueling speculation that the Bank of England is close to ending its rate hike cycle and prompting some to start cutting prices by the end of the year. The Australian dollar, on the other hand, jumped to its highest level since August after the tepid inflation numbers also sent 10-year Australian yields up around 10 basis points.

Elsewhere, oil prices edged lower, giving up earlier gains and looking set to extend Tuesday’s sharp decline triggered by weak US business activity. while gold edged lower after recent gains pushed the precious metal to its highest level since April. Bitcoin fell as much as 2.5% and faced its first two-day decline of the year.

Key events this week:

  • Earnings for the week include: Abbott Laboratories, ASML Holding, AT&T, Boeing, International Business Machines, NextEra Energi, Tesla (Wednesday); American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)

  • US MBA mortgages, Philadelphia Fed non-manufacturing activity, Wednesday

  • US fourth quarter GDP, new home sales, initial jobless claims, Thursday

  • US Personal Income/Consumption, PCE Deflator, University of Michigan Consumer Sentiment, Pending Home Sales, Friday

Some of the main moves in the market:

Actions

  • The Stokk Europe 600 was down 0.4% at 11:14 a.m. London time

  • S&P 500 futures down 0.7%

  • Nasdaq 100 futures down 1.1%

  • Dow Jones Industrial Average futures fell 0.5%

  • MSCI Asia-Pacific index rose 0.3%

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.2% to $1.0862

  • The Japanese yen rose 0.3% to 129.81 per dollar

  • The offshore yuan was little changed at 6.7805 per dollar

  • The British pound weakened 0.2% to $1.2309

cryptocurrencies

  • Bitcoin fell 1.2% to $22,621.21

  • Ether fell 3.1% to $1,548.63

Bonds

  • The yield on 10-year Treasuries fell two basis points to 3.43%

  • Germany’s 10-year yield fell four basis points to 2.11%

  • Britain’s 10-year yield fell six basis points to 3.21%

Commodities

  • Brent crude fell 0.3% to $85.89 a barrel

  • Spot gold fell 0.6% to $1,925.11 an ounce

This story was produced with help from Bloomberg Automation.

–With help from Richard Henderson.

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©2023 Bloomberg LP

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