
LONDON, – Global stocks sagged on Wednesday following disappointing earnings reports from Tesla, Alphabet, and European luxury brands. Meanwhile, oil prices traded near six-week lows due to lackluster summer demand.
The U.S. dollar remained broadly steady as traders anticipated an inflation reading on Friday and a Federal Reserve meeting next week. In contrast, the yen surged to a seven-week high ahead of its central bank meeting.
European Markets
The pan-European STOXX 600 index fell 0.34% to 513.72 points by 1143 GMT, driven by a 2% slump in the personal and household goods sector. The decline followed slower sales growth reported by LVMH, the world’s largest luxury group, as Chinese consumers curtailed spending.
Asian Markets
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.32%, while Japan’s Nikkei slid 1%.
U.S. Markets
Nasdaq futures fell 1.1% and S&P 500 futures were 0.7% lower after Tesla reported its lowest profit margin in five years. Alphabet shares slipped in after-hours trading despite beating revenue and profit targets, as investors questioned the returns on Google’s substantial investments in AI.
“The interim results season is kicking off on both sides of the Atlantic and, so far, investors are underwhelmed by what they have seen,” said Steve Clayton, head of equity funds at Hargreaves Lansdown.
Oil Prices
Oil prices ended three straight losing sessions on Wednesday, aided by declining U.S. crude inventories and supply risks from Canadian wildfires. However, prices remained near month-and-a-half lows due to tepid demand. Brent crude futures for September rose 84 cents, or 1%, to $81.83 a barrel, while U.S. West Texas Intermediate crude for September increased 93 cents, or 1.21%, to $77.89 per barrel.
Economic Indicators
Upcoming U.S. GDP data on Thursday and personal consumption expenditure data on Friday, the Fed’s preferred inflation measure, could influence investor expectations regarding interest rate cuts. Markets are pricing in 62 basis points of easing this year, with a 95% likelihood of a cut in September, according to the CME FedWatch tool.
A Reuters poll indicated that a growing majority of economists expect the Fed to cut rates twice this year, in September and December, as resilient U.S. consumer demand calls for a cautious approach despite easing inflation.
“The U.S. consumer has remained extremely strong… but you’re starting to see a degree of fragility underlying some of the data,” said Luke Browne, head of asset allocation for Asia at Manulife Investment Management.
Yen Performance
The yen spiked to its highest in seven weeks, reaching 154.1 per dollar after surging nearly 1% on Tuesday. Traders are focused on a Bank of Japan meeting next week, with a 44% chance of a 10 basis point hike being priced in. Suspected intervention by Tokyo in early July to elevate the yen has led to speculators unwinding profitable carry trades.
The yen also gained against other currencies, hitting over one-month highs against the pound and the euro, and a two-month high against the Australian dollar. The dollar index, which measures the U.S. currency against six peers, remained little changed at 104.33, down 1.3% for the month.
Source: Reuters