- Arjun Pandit
- 24 Oct, 2023
- Mumbai
Asian markets traded mixed after U.S. Treasury yields edged lower and investors debated the rate path and its impact on global financial markets.
World financial markets have been on edge with the prospect of a wider conflict in the Middle East involving Lebanon, Iran, Turkey, Egypt, and Syria supporting Hamas and the U.S. supporting Israel.
Crude oil edged lower in Monday's trading after U.S. diplomats worked feverishly to arrange small aid for Gaza residents and hold off an Israeli military offensive, but tensions remained high in the region.
Israel said it carried out 324 targeted missile strikes in Gaza in the last 24 hours, and the Hamas-controlled Gaza health ministry said the civilian death toll reached 5,000.
With no end in sight for the Israel-Hams conflict, oil prices traded volatile amid worries of more violence in the region.
Benchmark indexes in Tokyo edged higher by 0.1%, and the closely watched manufacturing survey confirmed ongoing weak operating conditions in September.
The au Jibun Bank Japan Manufacturing PMI held at 48.5 in October, unchanged from the seven-month low reached in September.
The index declined for the fifth month in a row, primarily driven by weakness in new export orders and persistent weakness in domestic orders.
In addition, the backlog of orders declined for the 13th month in a row, with orders falling at a faster pace than in September.
China Stocks and Yuan Under Pressure
Market indexes in Hong Kong extended losses in 2023 due to persistent China growth worries and a steady stream of capital outflows.
The Hang Seng index declined 0.8% and the Shanghai Composite Index edged higher after China-controlled funds stepped up their purchases of ETFs on the Shanghai Stock Exchange.
In Hong Kong, tech stocks led stock decliners, and the benchmark index extended this year's loss to 15.9% after investors returned from a three-day holiday.
The Hang Seng index dropped to a 12-month low on the deepening malaise in the housing market, and the prospect of higher interest rates in the U.S. is draining interest in international investing.
Investors pulled out $5.1 billion this month, following the withdrawal of $75 billion in September, the most since December 2016, Goldman Sachs said in a research note.
In offshore trading, the yuan fell 0.03% to 7.30 against the U.S. dollar, and the tightly managed currency
Foreign investors withdrew $42 billion in August from the Chinese market, and the yuan has been under pressure for the last three months as the currency trades near its 16-year low.
Financial markets in India were closed to celebrate the Dassehra holiday, and the Sensex index fell sharply in Monday's trading, reacting to the rising U.S. bond yields and the worries of a wider conflict in the Middle East.
The Sensex index and the Nifty index declined 1.3% in Monday's trading, but the Indian rupee held firm against the U.S. dollar.
The KOSPI index in Seoul added 1%, and the ASX 200 index in Sydney edged higher by 0.2%.
Four leading banks in Australia—National Australian Bank, Westpac, Commonwealth Bank, and ANZ Banking—edged higher between 0.3% and 0.6%.
Mining companies BHP Group and Rio Tinto gained more than 1%, but Newcrest Mining Ltd. edged down 1.1%.
- Barry Adams
- 23 Oct, 2023
- New York City
Stocks rebounded from morning weakness and advanced after the 10-year Treasury yield retreated from 5%.
Benchmark indexes advanced 0.5% after falling more than 2% in the previous week on worries that the Federal Reserve is more likely to lift rates than previously thought.
Traders bid up stocks, but the lingering worries of another rate hike and higher rates through 2024 kept enthusiasm for stocks in check.
For more than a year, investors held the belief that interest rates would begin to ease in the fourth quarter of this year, and rates were nearing their peak in the early summer.
The steady drumbeat of peak interest rates for three months beginning in May emboldened investors to increase exposure to high-growth and tech stocks.
However, investor sentiment began to shift after the Federal Reserve held rates steady last month and, more importantly, revised its estimate of GDP to just over 2% from the previous estimate of 1%.
The sharp revision of economic growth also suggested that the economy is resilient enough to withstand higher rates.
Policymakers are more likely to raise rates if inflation stays well above the Fed's target rate of 2% amid persistently tight labor market conditions and economic growth above 2%.
The good news on the economic front is bad news for the bond market because faster-than-expected economic growth along with tight labor conditions will more likely keep inflation above the Fed's target rate.
Moreover, the U.S. federal government budget deficit rose to $1.7 trillion in the fiscal year 2023 that ended in September, an increase of 23% from a year ago after revenue declined and federal expenses rose on the back of higher Social Security, Medicare, and Medicaid commitments.
Tax revenue declined more than 40% because of lower capital gains after the collapse of the stock market in 2022, and the Internal Revenue Service also extended tax deadlines to natural disaster-affected areas in California, Georgia, and Alabama.
Investors are also looking ahead to a barrage of earnings from leading tech companies, and at least 700 companies are scheduled to announce their quarterly results this week.
Alphabet, Amazon.com, Meta, and Microsoft are scheduled to report their quarterly earnings this week.
U.S. Indexes and Yields
The S&P 500 index increased 0.4% to 4,241.51, and the Nasdaq Composite rose 0.9% to 13,097.05.
The yield on 2-year Treasury notes increased to 5.06%, 10-year Treasury notes inched higher to 4.86%, and 30-year Treasury bonds edged up to 4.98%.
Crude oil decreased $2.45 to $85.57 a barrel, and natural gas prices rose 3 cents to $2.93 a thermal unit.
The dollar index edged higher to 106.09, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Hess Corp. edged up 0.9% to $164.61 after the company agreed to an all-cash merger deal with Chevron for $171 a share, or $57 billion.
Chevron Corp. declined 2.2% to $163.12.
Apple Inc. declined 0.8% to $171.43 on the news that the Chinese government has opened a tax inquiry and land-use investigation for its largest supplier, Foxconn.
Taiwan-based Foxconn assembles many iPhone models in China and increasingly in India to diversify its production away from mainland China.
Stellantis NV edged up 0.9% to $19.05, and the United Auto Workers union said it plans to expand the strike to a plant in Michigan that produces Ram full-size pickup trucks.
The Sterling Heights, Michigan, plant has about 6,800 vehicle assembly workers.
Economic Worries and Rising Bond Yields Keep European Indexes Down
European markets extended the previous week's losses, and bond yields continued to advance.
Benchmark indexes in Paris, Frankfurt, and London fell between 0.3% and 0.7%, and bond yields in the Euro Area rose following the rise in 10-year U.S. Treasury notes.
European market indexes continued to drift lower on the rate uncertainties, looming economic slowdown and worries of resurgent inflation following the rebound in crude oil prices.
The European Central Bank's policy committee is scheduled to meet in Athens, and investors are anticipating no change in rates at the end of the meeting on Thursday.
However, the outlook for interest rates is highly uncertain because inflation is significantly ahead of 2%, despite multiple rate hikes by the European Central Bank and the Bank of England.
The rate uncertainties, combined with the recent rebound in crude oil prices, are keeping investors nervous as earnings season rolls on.
Europe Indexes and Yields
The DAX index increased 0.02% to 14,800.72, the CAC-40 index rose 0.5% to 6,850.47, and the FTSE 100 index dropped 0.4% to 7,374.83.
The yield on 10-yetrar German bonds increased to 2.94%, French bonds traded higher to 3.56%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.95%.
The euro hovered near a three-month low at $1.06, the British pound at $1.216, and the U.S. dollar at 89.20 Swiss cents.
Brent crude decreased $2.48 to $89.68 a barrel, and the Dutch TTF natural gas edged lower by €1.39 to €49.73 per MWh.
Europe Stock Movers
In Paris trading, banks led the decliners on the worries of higher interest rates, adding to the losses in bond portfolios held by banks.
BNP Paribas, Societe Generale, and Credit Agricole traded between -0.3% and 0.3%.
Renault SA extended losses to the second week and fell 1.5% to €32.74 after currency losses in Turkey and Argentina overwhelmed the overall results.
Mining and energy companies led the decline in London trading after market indexes in Shanghai, Shenzhen, and Hong Kong dropped to multi-month lows.
Anglo American, Antofagasta, Glencore, and Fresnillo dropped between 1% and 2.5%.
Homebuilders were also among the leading decliners in London trading after bond yields advanced in the U.K. and raised the prospect of another cycle of mortgage rate hikes.
In Frankfurt, Commerzbank and Deutsche Bank were among the leading decliners, with losses of 0.4%.
Vehicle makers were among the leading decliners on the twin worries of a looming global economic slowdown and rising competition from electric vehicle makers in China.
Volkswagen Group declined 1.6% to €101.50, Mercedes Benz dropped 0.5% to €61.46, and Porsche Automobil Holding SE fell 2.2% to €43.62.
- Barry Adams
- 23 Oct, 2023
- New York City
Benchmark indexes on Wall Street traded lower, and Treasury yields advanced as investors recalibrated interest rate expectations.
For more than a year, investors held the belief that interest rates would begin to ease in the fourth quarter of this year, and rates were nearing their peak in the early summer.
However, investor sentiment began to shift after the Federal Reserve held rates steady last month and, more importantly, revised its estimate of GDP to just over 2% from the previous estimate of 1%.
The sharp revision of economic growth also suggested that the economy is resilient enough to withstand higher rates.
Policymakers are more likely to raise rates if inflation stays well above the Fed's target rate of 2% amid persistently tight labor market conditions and economic growth near 2%.
Moreover, the U.S. federal government budget deficit rose to $1.7 trillion in the latest fiscal year that ended in September, an increase of 23% from a year ago after revenue declined and federal expenses rose on the back of higher Social Security, Medicare, and Medicaid.
Tax revenue declined more than 40% because of lower capital gains after the collapse of the stock market in 2022, and the Internal Revenue Service also extended tax deadlines to natural disaster-affected areas in California, Georgia, and Alabama.
Investors are also looking ahead to a barrage of earnings from leading tech companies, and at least 700 companies are scheduled to announce their quarterly results this week.
Alphabet, Amazon.com, Meta, and Microsoft are scheduled to report their quarterly earnings this week.
U.S. Indexes and Yields
The S&P 500 index decreased 0.9% to 4,237.43, and the Nasdaq Composite fell 1.3% to 13,002.46.
The yield on 2-year Treasury notes increased to 5.11%, 10-year Treasury notes inched higher to 4.96%, and 30-year Treasury bonds edged up to 5.11%.
Crude oil decreased $0.89 to $87.21 a barrel, and natural gas prices rose 1 cent to $2.91 a thermal unit.
The dollar index edged higher to 106.09, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Hess Corp. edged up 0.9% to $164.61 after the company agreed to an all-cash merger deal with Chevron for $171 a share, or $57 billion.
Chevron Corp. declined 2.2% to $163.12.
Apple Inc. declined 0.8% to $171.43 on the news that the Chinese government has opened a tax inquiry and land-use investigation for its largest supplier, Foxconn.
Taiwan-based Foxconn assembles many iPhone models in China and increasingly in India to diversify its production away from mainland China.
Stellantis NV edged up 0.9% to $19.05, and the United Auto Workers union said it plans to expand the strike to a plant in Michigan that produces Ram full-size pickup trucks.
The Sterling Heights, Michigan, plant has about 6,800 vehicle assembly workers.
- Bridgette Randall
- 23 Oct, 2023
- Frankfurt
European markets extended the previous week's losses, and bond yields continued to advance.
Benchmark indexes in Paris, Frankfurt, and London fell between 0.3% and 0.7%, and bond yields in the Euro Area rose following the rise in 10-year U.S. Treasury notes.
European market indexes continued to drift lower on the rate uncertainties, looming economic slowdown and worries of resurgent inflation following the rebound in crude oil prices.
The European Central Bank's policy committee is scheduled to meet in Athens, and investors are anticipating no change in rates at the end of the meeting on Thursday.
However, the outlook for interest rates is highly uncertain because inflation is significantly ahead of 2%, despite multiple rate hikes by the European Central Bank and the Bank of England.
The rate uncertainties, combined with the recent rebound in crude oil prices, are keeping investors nervous as earnings season rolls on.
Europe Indexes and Yields
The DAX index decreased 0.8% to 14,679.77, the CAC-40 index fell 0.2% to 6,802.85, and the FTSE 100 index dropped 0.6% to 7,354.99.
The yield on 10-yetrar German bonds increased to 2.94%, French bonds traded higher to 3.56%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.95%.
The euro hovered near a three-month low at $1.06, the British pound at $1.216, and the U.S. dollar at 89.20 Swiss cents.
Brent crude decreased $0.31 to $91.82 a barrel, and the Dutch TTF natural gas edged lower by €2.40 to €48.72 per MWh.
Europe Stock Movers
In Paris trading, banks led the decliners on the worries of higher interest rates, adding to the losses in bond portfolios held by banks.
BNP Paribas, Societe Generale, and Credit Agricole traded between -0.3% and 0.3%.
Renault SA extended losses to the second week and fell 1.5% to €32.74 after currency losses in Turkey and Argentina overwhelmed the overall results.
Mining and energy companies led the decline in London trading after market indexes in Shanghai, Shenzhen, and Hong Kong dropped to multi-month lows.
Anglo American, Antofagasta, Glencore, and Fresnillo dropped between 1% and 2.5%.
Homebuilders were also among the leading decliners in London trading after bond yields advanced in the U.K. and raised the prospect of another cycle of mortgage rate hikes.
In Frankfurt, Commerzbank and Deutsche Bank were among the leading decliners, with losses of 0.4%.
Vehicle makers were among the leading decliners on the twin worries of a looming global economic slowdown and rising competition from electric vehicle makers in China.
Volkswagen Group declined 1.6% to €101.50, Mercedes Benz dropped 0.5% to €61.46, and Porsche Automobil Holding SE fell 2.2% to €43.62.
- Scott Peters
- 20 Oct, 2023
- New York City
SolarEdge Technologies plunged 30.8% to $79.31 after the company lowered its third-quarter revenue outlook, citing cancellations and deferrals in Europe.
The company lowered its revenue range between $720 million and $730 million from the previous estimate between $880 million and $920 million.
Enphase Energy dropped 13.5% to $100.34 and First Solar declined 0.2% to $151.75, after SolarEdge revised its sales outlook.
Intuitive Surgical declined 4.5% to $260.95 after the robotic surgery device maker reported mixed quarterly results.
The company said total revenue increased 12% to $1.74 billion from $1.55 billion, net income soared to $415.7 million from $324.0, and diluted earnings per share advanced to $1.16 to 90 cents a year ago.
CSX Corp. added 2.1% to $31.18 after the railroad company reported mixed quarterly results.
Revenue in the third quarter declined 8% to $3.6 billion from $3.9 billion, net income plunged 24% to $846 million from $1.1 billion, and diluted earnings per share decreased to 42 cents from 52 cents a year ago.
American Express Company declined 3.2% to $144.92 despite the financial services company reporting positive quarterly results and demand for premium membership cards.
The charge card company posted sixth quarter in a row of record revenue but also hiked provision for delinquent accounts to $1.23 billion from $778 million a year ago.
Total revenue net of interest expenses increased 13% to $15.4 billion from $13.6 billion, net income advanced 30% to $2.5 billion from $1.9 billion, and diluted earnings per share advanced to $3.30 from $2.47 a year ago.
Regions Financial Corp plunged 15.5% to $14.0 after the regional bank reported weaker-than-expected quarterly results and also forecasted a decline in net interest income in the fourth quarter.
Net interest income in the third quarter increased by 2.3% to $1.29 billion from $1.26 billion, net income advanced to $490 million from $429 million, and diluted earnings per share rose to 49 cents from 43 cents a year ago.
Net interest margin in the quarter rose to 3.73% from 3.53% a year ago, and net interest income is expected to decline 5% in the fourth quarter and fall 11% in 2023 from 2022.
- Barry Adams
- 20 Oct, 2023
- New York City
Stocks faced headwinds after Treasury yields advanced and crude oil traded higher for the second week in a row on the worries of the Israel-Hamas war spreading to neighboring states.
The S&P 500 index and the Nasdaq Composite declined more than 0.8%, and tech stocks led the decliners after the yield on benchmark 10-year Treasury notes crossed 5%.
The benchmark bond yield is jumping above 5% for the first time since 2007.
On Thursday, Federal Reserve Chairman Jerome Powell stressed at a gathering in New York that rates are not restrictive enough and interest rates may have to stay higher for longer to cool inflation to the 2% target rate.
The yield on the 10-year Treasury advanced after Powell's comments and continued to rise in Friday's trading.
Israel-Hamas Conflict Worries Lift Crude Oil Higher
The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.
Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.
The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.
In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.
To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.
U.S. indexes and Yields
The S&P 500 index decreased 0.9% to 4,237.43, and the Nasdaq Composite fell 1.3% to 13,002.46.
The yield on 2-year Treasury notes decreased to 5.08%, 10-year Treasury notes inched lower to 4.91%, and 30-year Treasury bonds edged up to 5.08%.
Crude oil decreased $1.09 to $89.48 a barrel, and natural gas prices fell 4 cents to $2.90 a thermal unit.
The dollar index edged higher to 106.19, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
SolarEdge Technologies Inc plunged 30.8% to $79.31 after the company lowered its third-quarter revenue outlook, citing cancellations and deferrals in Europe.
The company lowered its revenue range between $720 million and $730 million from the previous estimate between $880 million and $920 million.
Enphase Energy Inc. dropped 13.5% to $100.34 and Frist Solar declined 0.2% to $151.75, after SolarEdge revised its sales outlook.
Intuitive Surgical, Inc declined 4.5% to $260.95 after the robotic surgery device maker reported mixed quarterly results.
The company said total revenue increased 12% to $1.74 billion from $1.55 billion, net income soared to $415.7 million from $324.0, and diluted earnings per share advanced to $1.16 to 90 cents a year ago.
CSX Corp added 2.1% to $31.18 after the railroad company reported mixed quarterly results.
Revenue in the third quarter declined 8% to $3.6 billion from $3.9 billion, net income plunged 24% to $846 million from $1.1 billion, and diluted earnings per share decreased to 42 cents from 52 cents a year ago.
American Express Company declined 3.2% to $144.92 despite the financial services company reporting positive quarterly results and demand for premium membership cards.
Total revenue net of interest expenses increased 13% to $15.4 billion from $13.6 billion, net income advanced 30% to $2.5 billion from $1.9 billion, and diluted earnings per share advanced to $3.30 from $2.47 a year ago.
Regions Financial Corp plunged 15.5% to $14.0 after the regional bank reported weaker-than-expected quarterly results and also forecasted a decline in net interest income in the fourth quarter.
Net interest income in the third quarter increased by 2.3% to $1.29 billion from $1.26 billion, net income advanced to $490 million from $429 million, and diluted earnings per share rose to 49 cents from 43 cents a year ago.
Net interest margin in the quarter rose to 3.73% from 3.53% a year ago, and net interest income is expected to decline 5% in the fourth quarter and fall 11% in 2023 from 2022.
- Inga Muller
- 20 Oct, 2023
- Frankfurt
European markets accelerated declines on the final day of the week and extended losses amid rising tensions in the Middle East, oil supply disruption worries, and interest rate uncertainties.
The DAX index decreased 1.2% to 14,860.79, the CAC-40 index fell 1.2% to 6,835.88, and the FTSE 100 index dropped 0.7% to 7,447.13.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.94%.
Husqvarna AB Class B declined 7.7% to 73.04 kronor after the Swedish garden equipment reported third-quarter revenue that fell short of market expectations.
In addition, the company announced 300 job cuts.
Sika AG increased 0.3% to CHF 218.80 after the Swiss chemical company reiterated its fiscal 2023 outlook.
L'Oreal SA declined 1.3% to €381.05 after the French cosmetic company's third quarter sales fell short of market expectations.
Vivendi SE advanced 2.5% to €8.46 after the French media company said third-quarter sales rose 2.5% to 2.43 billion from 2.37 billion a year ago.
Canal + Group revenue in the quarter increased 5.7%, and Havas Group revenue increased 4.5%, driven by increases in all divisions in the group.
InterContinental Hotels Group decreased 3.6% to 5,931.0 pence after the company said new hotel developments are on hold till the company is able to arrange short-term financing.
- Bridgette Randall
- 20 Oct, 2023
- Frankfurt
European markets extended weekly losses after crude oil prices advanced following worries of a widening conflict in the Middle East.
The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.
Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.
The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.
In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.
To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.
On the economic front, investors reviewed the sharp decline in Germany's producer price index and the fall in the UK's retail sales.
The German wholesale price index dropped at a record pace
Germany's producer price index fell at record pace for the second month in a row in September, largely because of the higher price base a year ago, the Federal Statistics Office reported Friday.
Producer prices fell 14.7% in September from a year ago, following a 12.6% decline in August.
The measure of wholesale price declined for the third month in a row, and prices fell at the fastest pace since record-keeping began in 1949.
On a monthly basis, producer prices declined 0.2% after rising 0.3% in August.
UK Retail Sales Declined In September.
Retail sales in the U.K. declined 0.9% in September from August, the Office for National Statistics reported Friday.
The cost of living crisis combined with unusually warm weather dragged down non-food store sales by 1.9% in the month, including sales at furniture, jewelry, watches, apparel, and department stores.
Food-store sales increased by 0.2%, and fuel sales rose by 0.8%.
On an annual basis, retail sales declined 1%, the smallest decline since sales started dropping in April 2022.
EU car Registrations Expanded In September
New car registration in the European Union increased 9.2% to 861,062 units, the European Automobile Manufacturers' Association reported Friday.
New car registration increased for the fourteenth month in a row as supply chain disruptions eased.
Passenger car registrations soared 22.7% from a year ago in Italy and jumped 10.7% in France, but declined 0.1% in Germany.
Petrol-fueled passenger cars led the registrations, but market share decreased to 34.1% from 35.3% a year ago, followed by hybrid-electric cars with 27.3% and battery-powered cars with 14.8%.
Europe Indexes and Yields
The DAX index decreased 1.2% to 14,860.79, the CAC-40 index fell 1.2% to 6,835.88, and the FTSE 100 index dropped 0.7% to 7,447.13.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.94%.
The euro hovered near a three-month low at $1.058, the British pound at $1.212, and the U.S. dollar at 89.16 Swiss cents.
Brent crude increased $1.0 to $93.37 a barrel, and the Dutch TTF natural gas edged higher by €1.70 to €51.87 per MWh.
Europe Stock Movers
Husqvarna AB Class B declined 7.7% to 73.04 kronor after the Swedish garden equipment reported third-quarter revenue that fell short of market expectations.
In addition, the company announced 300 job cuts.
Sika AG increased 0.3% to CHF 218.80 after the Swiss chemical company reiterated its fiscal 2023 outlook.
L'Oreal SA declined 1.3% to €381.05 after the French cosmetic company's third quarter sales fell short of market expectations.
Vivendi SE advanced 2.5% to €8.46 after the French media company said third-quarter sales rose 2.5% to 2.43 billion from 2.37 billion a year ago.
Canal + Group revenue in the quarter increased 5.7%, and Havas Group revenue increased 4.5%, driven by increases in all divisions in the group.
InterContinental Hotels Group decreased 3.6% to 5,931.0 pence after the company said new hotel developments are on hold till the company is able to arrange short-term financing.
- Barry Adams
- 19 Oct, 2023
- New York City
Market indexes turned sharply lower after investors reviewed the latest comments from the Federal Reserve Chairman Jerome Powell.
Fed Chair Powell stressed that interest rates are still not "restrictive enough" and higher rates may be needed if inflation fails to cool to the target rate of 2%.
In an unusual admission, Powell said that inflation was driven higher not only by distortions in supply chains but also in demand.
Demand surged during the pandemic era between 2020 and 2022 after the Federal Reserve revved up its printing presses and pumped money into the economy through various government stimulus measures and the U.S. Treasury bonds purchases.
Powell added that despite the recent cooling of inflation as measured by the core PCE Index, inflation is still hovering at 3.7%, ahead of the Fed target rate.
Monetary policy may not be restrictive enough and may need more tightening, and below-trend economic growth rate and additional softening in labor market conditions, Chairman Powell stressed in comments delivered at a gathering in New York.
Investors appeared divided about the future direction of interest rate in the short-term, but interest rates are likely to stay higher through 2024.
The S&P 500 index and the Nasdaq Composite index extended weekly losses to 2.4% and 3.2% respectively as investors debated the Fed's next move and rate path and level after the policy meeting at the end of this month.
The yield on 10-year Treasury notes edged higher and hovered near 5% level and investors increased the likelihood of a rate hike at the end of the next policy meeting on November 1.
In stock trading, market indexes accelerated decline and rate sensitive stocks led the losers after Chairman Powell stressed the need for restrictive rates.
Investors reacted positively after Netflix reported a surge in net paid subscribers in the third quarter and forecasted revenue growth to sustain in the fourth quarter.
Tesla faced headwinds after the electric vehicle maker reported a sharp drop in quarterly earnings and a decline in gross margin after the company offered larger-than-usual discounts.
Weekly Jobless Claims Fell
On the economic front, the initial jobless claims declined 14,000 to 198,000 for the week ending on October 14, the U.S. Department of Labor reported Thursday.
The weekly jobless claims dropped to the lowest level since January, confirming the tight labor market conditions.
Existing Home Sales Dropped to a 13-year Low Annual Rate
Existing home sales continued to decline confirming housing market trends reported by recent releases.
Existing home sales in September decreased 2.0% from August and dropped 15.4% from a year ago to a seasonally adjusted annual rate of 3.98 million.
Rising mortgage rates and elevated home prices discouraged first-time home buyers from seeking homes, and the share of first-time home buyers dropped to 27% from 29%.
The number of home transactions dropped to a 13-year low largely because homeowners locked with low interest mortgage rates struggled to justify new purchases.
"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," said NAR Chief Economist Lawrence Yun.
Home prices advanced for the third month in a row, confirming that demand for housing is still strong.
The median existing-home price for all housing types in September increased 2.8% to $394,300, and prices rose in all four U.S. regions.
U.S. Indexes & Yields
The S&P 500 index decreased 0.9% to 4,278.0 and the Nasdaq Composite fell 1.0% to 13,186.28.
The yield on 2-year Treasury notes increased to 5.16%, 10-year Treasury notes inched higher to 4.99% and 30-year Treasury bonds edged up to 5.11%.
Crude oil decreased $0.89 to $87.46 a barrel and natural gas prices fell 2 cents to $3.07 a thermal unit.
The dollar index edged higher to 106.29, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Tesla Inc decreased 7.5% to $224.30 after the electric vehicle maker reported a sharp decline in its quarterly profits and weaker margins.
Revenue in the third quarter increased 9% to $23.4 billion from $21.5 billion and net income attributable to shareholders plunged 44% to $1.9 billion from $3.3 billion and diluted earnings per share dropped to 53 cents from 95 cents a year ago.
Moreover, free cash flow plunged to $848 million from $3.3 billion as the company continued its investment in Artificial Intelligence based products, autonomous vehicles and its much delayed Cybertruck vehicle.
Netflix Inc soared 15% to $397.60 after the video streaming platform operator reported sharply higher revenue and earnings growth and added that the company is likely to exceed its annual free cash flow estimate.
Revenue in the third quarter increased 7.8% to $8.5 billion from $7.9 billion and net income surged to $1.7 billion from $1.4 billion and diluted earnings per share advanced to $3.73 from $3.10 a year ago.
Global streaming paid members increased by 8.76 million to 247.15 million, an increase of 10.8% from a year ago.
Free cash flow soared to $1.9 billion from $472 million a year earlier.
The streaming platform estimated revenue in the fourth quarter to jump 11% to $8.7 billion and paid net additions to match the increase in the third quarter.
Rising Bond Yields Pushed Stock Market Indexes Down In Europe
Market indexes in Europe extended weekly losses after weak corporate results and rising bond yields compounded market anxieties.
The yields on government bonds advanced after the yield on 10-year U.S. Treasury notes approached 16-year high of 5%.
The yields on German bonds, French bonds and Italian bonds inched forward and hovered near the levels last seen in 2011.
Moreover, rising tensions in the Middle East also added to market jitters on the worries that Israel's aggressive response to Hamas-led attack and kidnappings may widen the conflict in the Middle East.
Widespread protests in Turkey, Iran, Iraq, Lebanon, Egypt and Malaysia and in Washington D.C and London called for immediate ceasefire and also put additional pressures on diplomats seeking a peaceful solution.
Palestinians feared that Israel's call for evacuation in north Gaza will be followed by a ground invasion and then confiscation of their land, the root cause of the seven-decade long conflict.
On the earnings front, weak results from Nokia, Nestle, Renault also weighed on the market sentiment.
Euro Area Surplus Expanded
The Euro Area current account surplus expanded in August after trade surplus rose, the European Central Bank reported Thursday.
The current account surplus increased to €28 billion from €21 billion in the previous month.
International goods trade surplus in the month rose to €35 billion from €25 billion but the service surplus narrowed to €6 billion from €10 billion in the previous month.
In the twelve months to August, the current account surplus rose to €126 billion, or 0.9% of the euro area GDP, from €12 billion surplus or 0.1% of GDP a year ago.
Europe Indexes & Yields
The DAX index decreased 0.3% to 15,045.23, the CAC-40 index fell 0.4% to 6,921.37 and the FTSE 100 index fell 1.2% to 7,499.53.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70% and Italian bonds eased to 4.99%.
The euro hovered near a three-month low to $1.055, the British pound to $1.212 and the U.S. dollar fetched 89.72 Swiss cents.
Brent crude increased $1.11 to $92.61 a barrel and the Dutch TTF natural gas edged lower by €0.66 to €50.17 per MWh.
Europe Stock Movers
Nestle SA decreased 2.2% to CHF 99.89 after the Swiss food company's nine-month sales growth disappointed investors.
Nokia Oyj dropped 6.0% to €3.07 after the company reported weaker-than-expected third quarter results and the company also said it plans to trim its workforce.
Hargreaves Lansdown PLC fell 4.5% to 704.50 pence after the retail financial services provider said client acquisition growth declined in the fiscal first quarter.
McBride Plc soared 19.5% to 38.86 pence after the U.K.-based household products maker said market momentum of the second-half fiscal 2023 continued in the fiscal 2024 first quarter.
Merck KGaA jumped 2.4% to €149.0 after the German pharmaceutical company forecasted sales growth to return in the fiscal 024 and the growth is expected to continue beyond 2025.
Sartorius AG decreased 1.2%to €208.0 after the German biotech company reported results for the first nine months of the year.
Pernod Ricard SA jumped 4% to €164.90 after the French wine and spirits maker forecasted higher sales in the fiscal 2024.
Renault SA dropped 6.7% to €33.74 after the French automaker said currency weakness in Turkey and Argentina weighed heavily on its sales growth in the third quarter.