Market Indexes In the U.S. and Europe Turn Lower Amid Interest Rates Uncertainties

Alexander Garcia
25 Apr, 2024
Miami

Benchmark indexes on Wall Street dropped more than 1% and the yield on Treasury notes advanced after the release of the latest GDP report. 

The S&P 500 index and the Nasdaq Composite fell more than 1% after the economy sharply slowed down in the first quarter ad consumer price inflation accelerated. 

First quarter GDP growth fell short of expectations due to lower investment in inventories, the U.S. Bureau of Economic Analysis reported Thursday. 

GDP in the first quarter expanded at an annual pace of 1.6%, sharply lower than the 3.4% annual rate in the final quarter of 2023. 

Increases in consumer and government spending and residential and non-residential fixed investment were offset by a decrease in private inventory investment. 

Moreover, personal consumption price index, a measure of inflation, rose at 3.4%, faster than 1.8% in the previous quarter, and core PCE index, which excludes food and energy prices, accelerated 3.7% from 2.0%. 

The yield  on 10-year Treasury notes rose to 4.71% after the release of the GDP report on the worry that interest rates are likely to stay elevated, after economic growth slowed and inflation accelerated. 

Tech stocks were also under pressure after Meta Platform's light revenue estimate in the current quarter disappointed some investors. 

IBM declined more than 7% after the company's revenues fell short of market expectations. 

However, Chipotle Mexican Grill and Honeywell advanced after reporting strong earnings. 

Southwest declined after the regional airline lowered its growth outlook and American Airlines reported a quarterly loss, but the company's current quarter outlook supported the market enthusiasm. 

 

U.S. indexes and yields

The S&P 500 index decreased 1.2% to 5,010.05, and the Nasdaq Composite fell 1.7% to 15,447,56. 

The yield on 2-year Treasury notes edged higher to 5.0%, 10-year Treasury notes inched up to 4.73%, and 30-year Treasury bonds edged lower to 4.81%.

WTI crude oil decreased $0.54 to $82.15 a barrel, and natural gas prices fell 1 cent to $1.64 a thermal unit.

Gold decreased by $15.34 to $2,331.35 an ounce, and silver fell 21 cents to $27.40. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.69.

 

U.S. Stock Movers

Southwest Airlines plunged 7% to $27.0 after the regional airline reported a wider-than-expected loss in the first quarter, and the company said it anticipates fewer plane deliveries from Boeing. 

Revenue in the first quarter increased 11% to $6.3 billion, net loss expanded to $231 million from $159 million, and diluted loss per share increased to 39 cents from 27 cents a year ago. 

The airline said it expects to receive a total of 20 Boeing 737 Max 8 airplanes compared to its previous estimate of 46 planes in 2024, and the company plans to delay retiring some of its older planes and look for ways to cut costs. 

American Airlines Group rose 5.2% to $14.63 after the company reported better-than-expected quarterly results. 

Revenue in the first quarter increased 3.1% to $12.6 billion from $12.2 billion; the company swung to a net loss of $312 million compared to a profit of $10 million; and diluted earnings per share were a loss of 48 cents compared to a profit of 2 cents. 

The company said it lowered its debt by $950 million in the first quarter, and it is on track to lower its debt by $15 billion by 2025. 

The company estimated its adjusted diluted earnings per share for the second quarter between $1.15 and $1.45 and for the full year between $2.25 and $3.25. 

Meta Platforms plunged 14.5% to $421.80 after the social networking site operator projected weaker-than-estimated revenue. 

Revenue in the first quarter increased 27% to $36.5 billion from $28.6 billion, net income rose 117% to $12.4 billion, and diluted earnings per share advanced to $4.71 from $2.20 a year ago. 

In the quarter, the company repurchased $14.64 billion of its common stock and paid $1.27 billion in dividends. 

The company guided second-quarter revenue to range between $36.5 billion and $39 billion and revised its full-year revenue to a range between $96 billion and $99 billion compared to the previous estimate of $94 billion and $99 billion. 

 

European Markets Trade Lower, BHP Bids for Rival Anglo American 

European market indexes decreased in cautious trading as investors reviewed the latest batch of earnings in the region and accelerated losses after the release of the U.S. GDP data. 

The market mood was cautious amid interest rate path uncertainties and a widening yield gap between the U.S. and Europe. 

Benchmark indexes in Frankfurt and Paris edged lower, and the reference index in London advanced after BHP proposed to acquire rival Anglo American and create the largest copper miner in the world, with about 10% of the world's production. 

 

French Manufacturing Confidence Index Eased 

France's manufacturing confidence index weakened in April, reflecting the pessimistic outlook for new orders, the latest survey from the statistical office INSEE showed. 

The confidence index eased to 100 from the revised 103 in March and hovered near the 5-year average as expectations for general production remained weak but the selling price trend turned positive. 

 

German Consumer Morale Improved 

Forward-looking German consumer morale improved in May, according to the latest survey released by the market research group GfK. 

The consumer climate index improved to -24.2 for May from -27.3 for April, reaching the highest level in two years. 

Income expectations surged to the highest level since January 2022, while the propensity to save rose to a high level of 14.9 from 12.4 in the previous year due to the persistent economic uncertainty in Europe's largest economy. 

Consumer sentiment has been on the recovery after reaching a record low in October, but consumers still avoided discretionary items due to economic uncertainties, elevated inflation, and interest rates. 

 

Europe Indexes and Yields

The DAX index decreased by 1.1% to 17,883.74; the CAC-40 index fell by 1.1% to 8,003.36; and the FTSE 100 index inched higher by 0.4% to 8,067.60. 

The yield on 10-year German bonds edged up to 2.57%; French bonds inched higher to 3.07%; the UK gilts edged higher to 4.32%; and Italian bonds inched higher to 3.92%.

The euro edged higher to $1.072; the British pound inched higher to $1.252; and the U.S. dollar edged higher to 91.23 Swiss cents.

Brent crude decreased $0.27 to $87.61 a barrel, and the Dutch TTF natural gas rose by €1.09 to €30.26 per MWh.

 

Europe Stock Movers

Anglo American plc soared 12.9% to 2,491.50 pence after the company received a takeover proposal from the rival BHP Group for £31 billion. 

BHP Group declined 2.9% to 2,295.0 pence. 

Nestle SA decreased 3.4% to CHF 90.78 after the Swiss food and beverage maker missed its organic sales growth estimates in the first quarter. 

Unilever plc rose 4.5% to 4,064.0 pence after the consumer products company reported better-than-expected quarterly sales and reiterated its full-year sales growth estimate between 3% and 5%. 

Hellofresh SE increased 3.8% to €7.0 after the meal-kit provider reiterated its fiscal year 2024 outlook. 

Delivery Hero soared 9% to €31.55 after the food delivery company reported strong first-quarter results and confirmed its fiscal year 2024 annual outlook. 

Pernod Ricard declined 3.3% to €140.25 after the French wine and spirit maker reported weaker-than-anticipated fiscal third quarter sales. 

Barclays PLC rose 5.4% to 200.85 pence after the UK-based financial services provider suffered a smaller-than-expected fall in profit in the first quarter. 

 

Rate Jitters Sap Market Sentiment In Japan, Yen Falls Below 155 Mark 

Benchmark indexes in Tokyo halted a three-day market rally ahead of the Bank of Japan's monetary policy decisions on Friday. 

The Nikkei 225 Stock Average declined 1.9% to 37,734.39, and the Topix index dropped 1.4% to 2,673.27. 

Amid a broad selloff, technology and exporters led the decliners as rate jitters turned volatile in the session. 

The Japanese yen traded at 155.61 against the U.S. dollar and fell below the 155 mark for the first time in 34 years, and the Bank of Japan was widely expected to hold rates steady at the end of a two-day meeting on Friday. 

Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho fell around 1%, and banks and financial services were among the leading decliners ahead of the BOJ's rate decision. 

Tech stocks were under pressure after Facebook-parent Meta Platforms issued a weaker-than-expected revenue outlook. 

Tokyo Electron, SoftBank, Screen Holdings, Lastertec, Advantest, and Socionext fell between 1.5% and 4%. 

Retailers were also under pressure; Isetan Mitsukoshi declined 5%, J Front Retailing fell 2.5%, and Fast Retailing dropped 3.5%. 

Canon Inc. declined 7.7% to ¥4,100.0 after the camera maker reported weaker-than-expected earnings in the March quarter. 

Revenue in the quarter increased by 1.8% to ¥988.5 billion, after the increases in printer, medical, and industrial equipment sales growth were overwhelmed by an 8.8% decline in sales in the camera business. 

Operating profit declined 5.2% to ¥80.2 billion, or $515.5 million, after selling and other expenses rose at a faster pace than revenue. 

Net profit rose 6.3% to ¥59.9 billion and fell short of market expectations despite the weakness in the yen. 

The camera and printer maker reiterated its 2024 net income outlook at ¥305 billion. 

Elsewhere in Asia, markets traded lower tracking losses in overnight trading in New York, and tech stocks dropped after Facebook-parent Meta Platform's guidance fell short of market expectations. 

The KOSPI index in Seoul declined 1%, and South Korea's economy expanded by 3.4% in the March quarter from a year ago, following a 2.2% increase in the fourth quarter. 

The economy expanded at the fastest pace since the fourth quarter of 2021, driven by higher consumption of goods and services and a sustained increase in exports of tech products. 

 

China Stocks Ride Earnings Wave

Stocks in Shanghai edged slightly higher, and those in Hong Kong gained on the optimism about growing interest from foreign investors. 

Market indexes in Shanghai advanced as investors brace for corporate results, and investors are hoping that quarterly results would exceed lowered expectations. 

Stocks in Hong Kong advanced after foreign investors increased their holdings of Chinese stocks, and mainland investors also added exposure for the 19th consecutive session.

Investor sentiment was cautiously optimistic after a Chinese regulatory agency announced support for mainland companies to list on the Hong Kong Stock Exchange. 

Investors overlooked rising tensions between China and the U.S. after President Joe Biden approved the divestment of a stake in video-sharing platform TikTok. 

The CSI 300 index increased 0.2% to 3,530.09, and the Hang Seng Index rose 0.6% to 17,295.93. 

Lenovo Group added 3.4% to HK$8.92; SMIC added 2.2% to HK$15.16; and SenseTime Group jumped 10% to HK$0.88. 

China Overseas Land & Investment reported first quarter profit rose 14% from a year ago, lifting property stocks in Hong Kong.

China Vanke gained 1% to HK$3.89, and Longfor Group added 3.9% to HK$9.78. 

 

Honk Kong Exchanges Earnings Drop 

Hong Kong Exchanges and Clearing Limited increased 3.6% to HK$247.80 after the stock exchange operator reported earnings during Wednesday's lunch break.

Revenue in the first quarter ending in March declined 6% to HK$5.2 billion, or $664 million, and net profit fell 13% to HK$2.97 billion, or $356 million. 

The average daily trading volume in the period fell by 22%, and the company blamed the decline on continued geopolitical tensions and macroeconomic volatility. 

Weaker trading revenue and listing fees negatively impacted first-quarter revenue, but the exchange operator said in a statement that 85 companies are looking to list their stocks on the bourse in the near future.

A total of 12 companies raised HK$4.7 billion, a decline of 28% from a year ago, according to the data compiled by Ticker.com. 

 

Li Ka-shing Controlled Companies Acquires Ireland's Phoenix Energy 

CK Asset Holdings gained 1.5% to HK$32.75, and CK Infrastructure Holdings jumped 0.6% to HK$44.60 after the two companies controlled by Li Ka-shing formed a consortium to acquire the largest natural gas network operator in Northern Ireland, Phoenix Energy.

CK Assets and CK Infrastructure will own 40% each, and Power Assets Holdings, the international energy investment unit controlled by Li Ka-Shing, will hold the remaining 20%. 

The three-company consortium agreed to pay $940 million, or £757 million, to acquire the holdings controlled by NatWest Group Pension Fund and Utilities Trust of Australia.