Treasuries rise as Tech Giants Drive Down US Futures: Markets Wrap

Microsoft and Alphabet experience a post-market decline after results

Despite strong earnings, European stocks decline, and oil prices fall.

Treasuries rise as Tech Giants Drive Down US Futures: Markets Wrap

After post-market declines in megacap technology companies ruined a three-day Wall Street bounce and sparked fresh concerns about whether this year's $5.5 trillion selloff is nearing a bottom, US equities futures declined alongside stocks in Europe.


Contracts on the Nasdaq 100 fell 1.8% after disappointing quarterly reports from Texas Instruments Inc., Alphabet Inc., the parent company of Google, and Microsoft Corp. highlighted the mounting strain the Federal Reserve's interest-rate hikes are putting on the economy. A measure of the dollar fell for a second day to its lowest level in three weeks as Treasuries continued to rise and the 10-year yield dropped to about 4.05%.


Despite a flood of encouraging earnings reports, the Stoxx Europe 600 index declined at the opening bell, with the technology sector down over 2%.


More than two-thirds of the S&P 500 businesses that have released their third-quarter results have surpassed analysts' expectations, according to data compiled by Bloomberg. However, a survey released on Tuesday revealed that home price growth in the US halted as high borrowing rates weakened demand. This is another proof that the US economy is already feeling the effects of Fed tightening, which might hurt profitability in the months to come.


Mike Ingram, a senior market strategist at ActivTrades, stated on Bloomberg TV, "Yes, we're witnessing earnings beats right now. "However, where I do start to have a little bit of an issue right now is that some earning forecasts for next year are still looking a little bit punchy," the author said.


In China, Japan, and South Korea, stocks rose. China's central bank and foreign exchange regulator stated they would sustain the robust growth of the stock and bond markets and reiterated that the yuan would be "essentially steady," which were both encouraging indicators for Asia.


A measure of Chinese stocks with US listings had a near 5% comeback on Tuesday, helping to somewhat offset the record loss that followed President Xi Jinping's defiance of China's collective leadership. Although Hong Kong's tech gauge continued to make significant gains, it fell short of recovering from Monday's nearly 10% decline.


Prior to the Bank of Japan's policy announcement on Friday, when monetary policy is anticipated to remain unchanged, the yen dropped to about 148 to the dollar. As rising yields threatened to weaken its hold on the yield curve, the central bank increased purchases of longer-dated government bonds in the meantime.


Recent US data haven't altered predictions that the Fed will increase interest rates by 75 basis points next month, but they are igniting talk that the Fed's aggressive tightening cycle may come to an end in 2019. With a hefty boost of 75 basis points anticipated from the European Central Bank on Thursday, analysts are also predicting difficulty for the time being in Europe. Even still, many economists now believe the euro region has entered a recession.


"Sentiment is still quite brittle. We certainly anticipate more market turbulence, said Catherine Yeung, director of investments at Fidelity International, on Bloomberg Radio. "Everyone's attention is still focused on the global rate cycle and the direction of inflation. I believe it will be turbulent as we approach the conclusion of the year.


Oil dipped further as investors worried about reduced demand amid sluggish growth and an industry study revealed an increase in US crude stockpiles. As a result of falling Treasury yields, gold increased somewhat in Asia.

Key events this week:

  • Earnings due this week include: Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Visa, Volkswagen
  • Bank of Canada rate decision, Wednesday
  • ECB rate decision, Thursday
  • US GDP, durable goods orders, initial jobless claims, Thursday
  • Bank of Japan policy decision, Friday
  • US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.2% as of 8:16 a.m. London time
  • Futures on the S&P 500 fell 0.9%
  • Futures on the Nasdaq 100 fell 1.7%
  • Futures on the Dow Jones Industrial Average fell 0.3%
  • The MSCI Asia Pacific Index rose 0.8%
  • The MSCI Emerging Markets Index rose 0.7%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.2% to $0.9984
  • The Japanese yen rose 0.2% to 147.61 per dollar
  • The offshore yuan rose 0.5% to 7.2743 per dollar
  • The British pound rose 0.2% to $1.1494

Cryptocurrencies

  • Bitcoin rose 0.2% to $20,228.87
  • Ether rose 1.5% to $1,495.45

Bonds

  • The yield on 10-year Treasuries declined five basis points to 4.05%
  • Germany’s 10-year yield declined two basis points to 2.15%
  • Britain’s 10-year yield declined four basis points to 3.60%

Commodities

  • Brent crude fell 1.3% to $92.30 a barrel
  • Spot gold rose 0.8% to $1,665.88 an ounce

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