U.S. and World Markets Turn Lower Amid Rising Economic Uncertainties and Geopolitical Tensions

Barry Adams
16 Jan, 2024
New York City

U.S. market averages turned lower after investors returned from a three-day holiday, and Treasury yields advanced as investors reviewed the latest earnings reports and debated the future direction of interest rates.

The S&P 500 index and the Nasdaq Composite edged down about 0.4% as investors debated future rate cuts and their timing.

Investors were also worried about the possibility of another bout of inflation amid rising supply chain disruptions for shipments between Asia and Europe.

Houthi rebels stepped up their attacks on merchant ships for the second day in a row in the Red Sea, forcing shipments to be diverted away from the Suze Canal.

Investors also bid up Morgan Stanley and Goldman Sachs stocks after the financial services companies reported better-than-expected quarterly results.

Spirit Airlines and JetBlue faced a new hurdle after a federal judge blocked the $3.8 billion merger plan between the two airlines.

Spirit Airlines plunged 50% to $7.43, and JetBlue advanced 4% to $5.08.

"The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares,” U.S. District Court Judge William Young said in his decision.

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.5% to 4,760.08, and the Nasdaq Composite fell 0.4% to 14,909.30.

The yield on 2-year Treasury notes decreased to 4.22%. 10-year Treasury notes held steady at 4.0%, and 30-year Treasury bonds edged up to 4.23%.

WTI crude oil increased $0.55 to $72.06 a barrel, and natural gas prices decreased 14 cents to $2.94 a thermal unit.

Gold decreased by $28.51 to $2,025.92 an ounce, and investors debated the future interest rate path.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.12.

 

U.S. Stock Movers

Goldman Sachs rose 1.1% to $382.04 after the financial services company reported better-than-expected quarterly results on the back of strong performance in the asset management group.

Morgan Stanley increased 0.8% to $90.40 after the financial services company reported quarterly results that topped market expectations and were supported by strength in its investment banking unit.

 

European Markets Turn Lower After Rate Cut Hopes Fade

European markets declined after investors scaled back hopes of rate cuts in the near future.

Benchmark indexes in Frankfurt, Paris, and London traded down amid growing worries of a wider war in the Middle East, fading hopes of rate cuts, and persistent economic growth worries.

European policymakers drummed up their campaign against rate-cut hopes, and French central bank Governor Francois Villeroy de Galhau said it is too early to declare victory over inflation.

ECB policymaker Joachim Nagel said it was too early to discuss rate cuts, emphasizing that inflation remains too high, while delivering his prepared remarks at a gathering in Davos. Switzerland.

But the central bank's next move is likely to cut rates at some point this year, Villeroy de Galhau added during his comments delivered in Davos.

Yesterday, Austria's central bank governor, Robert Holzmann, said investors should not count on the European Central Bank cutting rates at all this year.

Investors reviewed the latest update on German inflation and UK wage growth.

 

Germany's December Inflation Rate Confirmed

Germany's consumer price inflation accelerated to 3.7% in December from 3.2% in November, the Federal Statistics Office, or Destatis, confirmed Tuesday the preliminary estimate released on January 4.

 

UK Wage Growth Slowed

Regular pay for UK wage earners increased 6.6% from a year ago in three months to November, the Office for National Statistics reported Tuesday.

The increase in wages, excluding bonuses, slowed from the downwardly revised 7.2% in the previous three-month period.

Wages, including bonuses, rose 6.5% in the three months to November.

The unemployment rate held steady at 4.2%, matching the rate in the previous three-month period.

 

Europe Indexes and Yields

The DAX index decreased 0.3% to 16,571.68, the CAC-40 index fell 0.2% to 7,3098.0, and the FTSE 100 index inched lower by 0.5% to 7,558.34.

The yield on 10-year German bonds edged up to 2.18%; French bonds inched higher to 2.76%; the UK gilts decreased slightly to 3.78%; and Italian bonds increased to 3.80%.

The euro edged lower to $1.08, the British pound inched lower to $1.267, and the U.S. dollar eased to 86.04 Swiss cents.

Brent crude advanced $0.07 to $78.07 a barrel, and the Dutch TTF natural gas decreased by €0.27 to €29.66 per MWh.

 

Europe Stock Movers

Energy and mining companies traded mixed after crude oil and metal prices turned higher in volatile trading.

BP plc rose 0.4% to 454.05 pence, and Shell plc decreased 0.5% to 2,447.90 pence.

Glencore PLC dropped 0.8% to 441.30 pence, Anglo American increased 0.3% to 1,830.40 pence, and Antofagasta decreased 0.4% to 1,617.0 pence.

Banks headed lower after European policymakers pushed back against the timing of rate cuts this year.

Deutsche Bank declined 1.2% to €11.79, Banco Santander declined 1.7% to €3.70, and UniCredit fell 0.6% to €25.46.

 

Asian Markets Turned Lower Ahead of China GDP and Retail Sales Data

Benchmark indexes in Asia traded down amid rising geopolitical tensions in the Middle East.

Market indexes in Tokyo, Shanghai, Hong Kong, Seoul, and Mumbai fell after Houthi rebels launched attacks in the Red Sea targeting U.S.-controlled ships.

Moreover, more shipping companies are avoiding the Red Sea shipping lanes to the Suez Canal and diverting shipments along the coast of South Africa.

But the shipment rerouting is disrupting supply chains between Asia and Europe and increasing the cost and time of shipments from India and Asia.

On the economic front, investors reviewed the latest update on international trade and the wholesale price index by India.

The trade deficit in December declined to a three-month low of $19.8 billion, the Commerce Ministry said late Monday.

A separate report showed that India's wholesale inflation increased to 0.73% in December, the office of the Economic Adviser reported on Monday.

Wholesale inflation edged higher after food prices rose 5.4%, primary article prices increased 5.8%, but fuel and power prices edged down 2.4%.

The Sensex index increased 0.08% to 73,384.57, and the Nifty index rose 0.07% to 22,112.70.

On the Mumbai stock exchange, 273 stocks traded at their 52-week highs and 7 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds eased 7.15%, and the Indian rupee edged lower to ₹82.94 against the U.S. dollar.

The Hang Seng index in Hong Kong fell 2.2% to 15,864.20 after property developers dropped a new low on debt default worries and a lack of government stimulus to spur demand.

The Hang Seng index dropped to a 14-month low and extended 2024 losses by 6%, after falling 14% in 2023 and for the fourth year in a row after foreign investors sold their holdings and avoided exposure to Chinese stocks.

The CSI 300 index in Shanghai traded down 0.2% to 3,275.57 ahead of the release of retail sales, GDP, and gross investment data on Wednesday.

China's economy is expected to expand at least 5.0% in 2023, according to economists interviewed by Ticker.com.

In Tokyo, the Nikkei index declined 0.5% to 35,721.08, and the index hovered near its 34-year high and traded in a tight range.

In Sydney, Australia, the ASX 200 index decreased 1% to 7,414.80 and dropped to a four-week low after energy and mining-related stocks led the decline.