U.S. and Europe Indexes Drop 1%, Asian Markets Face Weak Start

Barry Adams
13 Feb, 2024
New York City

Benchmark indexes on Wall Street turned lower after a hotter-than-expected inflation report raised the prospect of higher interest rates for longer, a key assumption underpinning the rally of the last three months. 

The S&P 500 index and the Nasdaq Composite declined more than 1% after consumer prices rose at a faster-than-expected pace in January. 

The yield on 2-year and 10-year Treasury notes advanced after inflation, and core inflation in January was ahead of market expectations. 

Consumer price inflation in January eased to a 3.1% annual pace in January from 3.4% in December, the U.S. Bureau of Labor Statistics reported Thursday. 

The decline in overall inflation was driven by the fall in energy price inflation by 4.6% from 2.0% in December, and food prices rose at a slower pace of 2.6% compared to 2.7% in the previous month. 

But it was the stubborn shelter price inflation that kept the overall inflation still above 3%. 

The rent and equivalent cost of occupying a residence increased by 0.6% from the previous month in January, accounting for more than two-thirds of the monthly increase for all items, according to the government agency. 

Rents have stopped rising in most urban locations across the country, but that disinflation is still not reflected in the inflation data. 

Compared to the previous month, consumer price inflation rose by 0.3%, the fastest pace of increase in four months. 

Core inflation, which excludes food and energy price inflation, held steady at an annual pace of 3.9% but rose to a monthly rate of 0.4%. 

 

U.S. indexes and yields

The S&P 500 index decreased 1.2% to 4,962.61, and the Nasdaq Composite fell 1.4% to 15,713.31. 

The yield on 2-year Treasury notes advanced to 4.62%, 10-year Treasury notes increased to 4.28%, and 30-year Treasury bonds edged up to 4.44%.

WTI crude oil increased $1.21 to $78.13 a barrel, and natural gas prices declined 9 cents to $1.66 a thermal unit, a low last seen in September 2020.

Gold increased by $8.85 to $2,025.52 an ounce after the U.S. dollar gained in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.97.

 

U.S. Stock Movers

The Coca-Cola Company gained 1.1% to $60.40 after the beverage maker reported mixed quarterly results in the fourth quarter. 

Revenue in the quarter rose to $10.85 billion after the company passed on higher prices to customers and bottlers. 

JetBlue Airways soared 13.2% to $6.82 after activist investor Carl Icahn reported a 10% stake in the company and added that the company's stock is undervalued. 

Zoominfo Technologies increased 16% to $18.40 after the market intelligence company reported better-than-expected quarterly results. 

Hasbro declined 5.8% to $48.30 after the toymaker reported sharply lower-than-expected earnings in the fourth quarter. 

Restaurant Brands International was nearly unchanged at $78.30 after the parent company of Tim Hortons reported better-than-expected quarterly results. 

 

European Markets Closed Down After U.S. Inflation Report

European markets traded sideways as traders digested the latest economic data in the region and avoided taking positions after the release of the U.S. inflation. 

Benchmark indexes in Frankfurt, Paris, and London edged slightly lower after lackluster trading in the previous session. 

Investors reacted to corporate results from TUI, the hydrogen company ThyssenKrupp Nucera, and Siltronic. 

Closer to home, the French jobless rate held steady in the fourth quarter of 2023, and Swiss inflation eased in January. 

The jobless rate in the UK in the fourth quarter of 2023 decreased to 3.8% from 3.9% in the third quarter, according to the data released by the Office for National Statistics. 

A separate report by the agency showed UK regular wages rose 6.2% in the final quarter, the lowest increase in fourteen months. 

The higher-than-expected increase in regular wages also supported the advance in the pound, easing the pressure on the Bank of England to lower rates. 

 

French Jobless Rate Held Steady In Final Quarter of 2023

The French jobless rate held steady at 7.5% in the fourth quarter after rising in the previous two quarters in a row, the statistical office INSEE reported Tuesday. 

The jobless rate in the fourth quarter matched the rate in the third quarter but rose 0.4 percentage points in the final quarter of 2022, when the rate was the lowest since 1982 and significantly lower than the peak of 10.5% in mid-2015. 

The number of unemployed persons increased by 29,000 to 2.3 million, and the jobless rate 

Over the quarter, the youth unemployment rate decreased by 0.2 points for 15–24 year olds to 17.5%, increasing by 0.6 percentage points from the previous year. 

The unemployment rate for those between the ages of 25 and 49 increased by 0.2 points over the quarter, to 7.0%, and is 0.5 points above its level a year earlier. 

Finally, the jobless rate for those aged 50 or over was almost stable over the quarter at 5.0%.

The activity rate for those between 15 and 64 old increased by 0.4 percentage points from a year ago to 74.1%, the highest level since record-keeping began in 1975.    

 

Swiss Inflation Eased In January 

The Swiss inflation rate dropped to the lowest level in January since October 2021, after inflation for housing and utilities eased, the Swiss Federal Statistics Office reported Tuesday. 

Consumer price inflation eased to 1.3% in January from 1.7% in December, after housing and utility inflation decreased to 2.5% from 3.3% in the previous month. 

Food and non-alcoholic beverage inflation slowed to 2.3% from 3.3%, and restaurant and hotel price inflation slowed to 2.3% from 2.8%. 

The core rate of inflation, which excludes volatile food and energy prices, rose 1.2%. 

On a monthly basis, prices rose 0.2% in January from December, reflecting higher electricity and hotel prices. 

 

Europe Indexes and Yields

The DAX index decreased 0.9% to 16,880.83, the CAC-40 index fell 0.8% to 7,625.31, and the FTSE 100 index inched lower by 0.8% to 7,512.28.

The yield on 10-year German bonds edged down to 2.35%; French bonds inched higher to 2.85%; the UK gilts edged higher to 4.07%; and Italian bonds inched higher to 3.90%.

The euro edged lower to $1.076, the British pound inched higher to $1.264, and the U.S. dollar gained to 88.15 Swiss cents.

Brent crude increased $0.81 to $82.81 a barrel, and the Dutch TTF natural gas declined by €0.29 to €25.44 per MWh.

 

Europe Stock Movers

TUI AG increased 2.7% to €7.03 after the tour operator reported a narrower loss in the fiscal first quarter and the company reiterated its annual outlook. 

Higher demand for tour packages and improved prices and rates also helped the company cut its losses. 

Thyssenkrupp Nucera increased 5.9% to €15.82 after the hydrogen company said its fiscal first quarter revenue increased by more than a third because of the rising demand for its electrolyser technology. 

Randstad NV added 1.3% to €53.96 after the Dutch staffing company said it plans to return €632 million to shareholders and meet its capital allocation plan. 

 

Nikkei 225 Index Nears 34-year High 

Market indexes in Tokyo jumped after investors returned from a three-day weekend, and the rise in tech stocks led the gainers.

The Nikkei 225 index soared 2.9% to 37,963.97 and traded at a fresh 34-year high, and the yen weakened to 149.10 against the U.S. dollar.

Lasertec, Advantest, Screen Holdings, and Tokyo Electron gained between 1.5% and 2.5%, respectively.

SoftBank Group soared 6.1% to ¥8,479.0 following the surge in Arm Holdings in New York trading on Friday and Monday.

Market indexes in Seoul advanced 1%, but in Sydney, they struggled to stay above the flatline.

Elsewhere in the region, financial markets were closed in mainland China, Taiwan, Hong Kong, Malaysia, and Singapore to celebrate the Lunar New Year.

 

MSCI Increased India Weight In Global Index

NMDC, Union Bank, Punjab National Bank, BHEL, and GMR Airports traded higher after MSCI added the companies to its MSCI India Standard index.

The index provider increased its India weight to 18.2%, a record high, only to be surpassed by the weight of China-based companies in its global index.

The independent research service provider removed 66 Chinese companies from its MSCI Global Standard Index and added five Indian and Chinese companies, but did not remove any Indian companies.

The revised weights will be reflected in the indexes after the close on February 29.

 

India Inflation Slowed In January 

Consumer price inflation eased to 5.1% in January from 5.69% in December, after food price inflation softened to 8.3% from 9.53% in the previous month, according to the Ministry of Statistics and Programme Implementation.

 

India's Industrial Output Accelerated 

Industrial output expanded 3.8% in December, faster than the 2.4% increase in November, a separate report from the agency showed.

Mining production expanded 5.1%, followed by a 3.9% rise in manufacturing production and a 1.2% increase in electricity output.

During the first nine months of the fiscal year 2024, industrial output rebounded 6.1% from a year ago due to sustained expansion in all three categories.

 

India Stocks Rebounded at Close

In Mumbai, market sentiment was positive in Tuesday's trading, and investors reviewed the latest updates on inflation and industrial output.

The Sensex and the Nifty indexes advanced after consumer price inflation slowed in January and industrial production rebounded in December.

The Sensex index increased 0.7% to 71,555.19, and the Nifty index rose 0.6% to 21,743.25.

Coal India advanced 2.2% to ₹442.20 after the mining company reported its quarterly results.

Revenue from operations increased 2.8% to ₹36,153.97 crore from ₹35,169.33 crore, and net profit rose 17.8% to ₹9,093.69 crore from ₹7,719.11 crore a year ago, respectively.

Coal production in the quarter increased to 199 million tons from 180 million tons a year ago.

The company also declared its second interim dividend of ₹5.25 per share to be payable on February 20.