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WORLD MARKETS-Amazon, Apple profits curb stock frenzy, euro to one-month high

By on October 29, 2021 0

* S&P Futures Down 0.47%, Nasdaq Futures Down 0.84%

* Euro drops 0.25% after hitting a one-month high on Thursday

* Italian bond yields soar

* Ether hits record high

By Carolyn Cohn

LONDON, Oct. 29 (Reuters) – Amazon and Apple earnings dampened enthusiasm for global equities on Friday, although the euro held close to its one-month highs amid hopes of rate hike in the euro zone.

Amazon.com on Thursday announced a decline in profits that is expected to continue throughout the holiday quarter as higher wages to attract workers and other operational disruptions diminish the company’s windfall from online shopping.

Supply chain problems cost Apple $ 6 billion in sales in the company’s fiscal fourth quarter, which fell short of Wall Street expectations, and chief executive Tim Cook said the impact would be even worse during the holiday sales quarter.

“Amazon and Apple suggest that demand is strong but the wage pressure is there, they won’t be able to deliver what they want for Christmas,” said Sébastien Galy, senior macro-strategist at Nordea Asset Management.

“It affects stocks somewhat negatively.”

S&P futures fell 0.47% and Nasdaq futures fell 0.84%, indicating a lower open on Wall Street, after the indices hit record close highs on Thursday.

Technological gloom hit European stocks, which lost 0.42%.

The MSCI Global Equity Index dipped 0.22% to 745.36, but broader optimism about the economic recovery put it on track for 5% gains in October, amid record highs of 749.16 reached last month.

Chinese blue chips reversed the trend and rose 0.92%, but an index of Chinese real estate companies fell 3.5% and fell nearly 12% on the week, the highest since February 2018.

Chinese developers are grappling with liquidity issues, and proposals to test a property tax are not helping sentiment even as regulators seek to contain the fallout centered on the struggling China Evergrande group.

Evergrande shares fell 3.7% on Friday despite news that it had fulfilled its second dollar bond repayment obligation this month.

Japan’s Nikkei rose 0.25% ahead of Sunday’s lower house elections in which the ruling party is expected to lose seats, but the coalition government is expected to remain safe.

INFLATION WATCH

The issue of rising prices and the reaction of central banks has boosted the currency and bond markets.

Data on Friday showed inflation in the 19 countries sharing the euro rose to 4.1% in October from 3.4% a month earlier, beating a consensus forecast of 3.7%. This reading is the highest since 2008 and equals the time series record launched in 1997.

However, the eurozone economy also grew 2.2% faster than expected in the third quarter, its fastest pace in a year and putting it on track to reach its pre-crisis size ahead of the crisis. end of the year.

The euro fell 0.25% to $ 1.1650 after hitting a one-month high on Thursday, comments from European Central Bank President Christine Lagarde having been interpreted in some quarters as not going not far enough to assert the central bank’s accommodative stance.

Eurozone bond yields surged, with Italian 10-year yields hitting 1.165% on Friday, their strongest since July 2020.

Markets are anticipating two ECB rate hikes by December 2022.

“Market expectations for rate hikes in 2022 are inconsistent with the ECB’s intentions, but President Lagarde has not retreated as much as the market demanded,” Rabobank analysts said in a note.

“It looks like we’ll have to wait until the December meeting, where nothing is likely to change, for the market to understand this better.”

There is also growing speculation that the Reserve Bank of Australia will struggle to stick to its forecast that rates are unlikely to rise until 2024 after it steps in to defend its 2024 bond yield target on Friday. “This constitutes a de facto abandonment of the policy of controlling the yield curve and means that the market can now expect a change in the monetary policy of the Australian Central Bank,” said Vincent Manuel, CIO of Indosuez Wealth Management.

Australian bonds continued this week’s steep decline, with three-year bond yields hitting 1.28% on Friday, their highest level since mid-2019.

US 10-year benchmark yields rose 3.8 basis points to 1.6066%.

The spread between 5-year and 30-year Treasury bill yields last stood at 79.95 basis points. It narrowed to 73.4 basis points overnight, its lowest since March 2020, amid heightened expectations that the Federal Reserve will hike rates next year.

Inflationary pressures are linked to a one-time shock to the economy, US Treasury Secretary Janet Yellen told CNBC in an interview in Rome on Friday.

Oil rose again above $ 84 a barrel, in preparation for a multi-year high this week, as expectations of OPEC and its allies will keep supplies tight amid rising US inventories and the prospect of an increase in Iranian exports.

Brent crude rose 0.3% to $ 84.57 a barrel. US West Texas Intermediate (WTI) crude futures gained 0.3% to $ 83.06 a barrel.

Spot gold slipped 0.2% to $ 1,794 an ounce.

Ether, the world’s second largest cryptocurrency, hit an all-time high of $ 4,400, before slashing gains.

(Additional reporting by Alun John in Hong Kong; Editing by Ana Nicolaci da Costa and Chizu Nomiyama)


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