A have a look at the day ahead in U.S. and global markets from Mike Dolan
World markets struggled to seek out a footing on Wednesday after Europe’s ASML sideswiped the worldwide chip sector late yesterday with a surprisingly weak orders outlook and investors prayed the flub was a one-off as third-quarter earnings updates stream in.
There was higher news for bond markets – with yields declining on a combination of falling oil prices and significant European disinflation that underscores expectations of one other European Central Bank rate of interest cut on Thursday.
And that picture was replicated in Britain on Wednesday, with headline inflation dropping much further below the Bank of England’s 2% goal than markets had bet on – upping bets on a BOE rate cut next month and knocking the pound back to its lowest in almost two months.
With European fixed income markets rallying again, U.S. Treasury yields also fell back near 4% and Federal Reserve futures are back fully pricing 1 / 4 point U.S. rate cut on Nov. 7.
But much of the warmth and price motion was in stocks.
While banks and pharma firms dominate Wednesday’s diary, reverberations from ASML’s big miss knocked Wall Street back from record highs on Tuesday, adding to a swoon in energy stocks from falling oil prices and throwing a highlight on Thursday’s update from Taiwan’s chip behemoth TSMC.
The read across to AI-darling Nvidia saw its shares recoil almost 5% from Monday’s recent record, with a small recovery pencilled in ahead of today’s bell.
Nevertheless ASML itself, the world’s biggest chipmaking equipment manufacturer, shed one other 4% in Europe on Wednesday, adding to the 16% loss on Tuesday – its steepest one-day decline in 4 years.
And in a nasty week for European stocks more generally, the luxurious sector remained under the cosh as France’s LVMH dropped 7% due a fall in third-quarter sales hit by waning customer confidence in China.
China’s struggling economy, U.S. investment curbs on its technology sector and a brewing tariff trade war between Beijing and Brussels tie all these stories together.
And despite barely frantic Chinese stimulus measures in recent weeks to lift the flagging economy, the initial stocks boost from that’s fading fast. China’s mainland index and Hong Kong’s Hang Seng led to the red again on Wednesday – each greater than 10% off post-stimulus highs.
Beijing will hold a press conference on Thursday to debate promoting the “regular and healthy” development of the property sector, the State Council Information Office said, although that is did not reignite much market excitement.
And indeed China’s troubles, together with scaled back global oil demand forecasts for 2025, are one in every of the explanations crude prices are sliding yet.
Crude tumbled greater than 4% to a near two-week low on Tuesday as a result of that weaker outlook and after a media report said Israel wouldn’t strike Iranian nuclear and oil sites, easing fears of supply disruptions.
While U.S. oil prices tried to retain a toehold on $70 per barrel on Wednesday, they proceed to trace year-on-year losses of close to twenty% and remain a strong force depressing headline annual inflation rates.
Back on Wall St, the chip sector wobble cut across higher news from the banks.
Bank of America shares rose 0.5% following a third-quarter profit beat, while Charles Schwab shares climbed 6% after exceeding estimates.
Citigroup, nonetheless, fell 5% after it reported mixed results with net income declining and net interest income weaker than expected while debt underwriting propped up its investment banking results.
Morgan Stanley and a few of the small regional banks are up next on Wednesday.
Wall St futures more broadly are barely higher before the open.
Aided partly by sterling’s slide, the dollar index nudged to its best levels since early August.
Because the U.S. election campaign enters its final phase, betting markets put Republican Donald Trump because the slight favorite to return to the White House despite opinion polls showed a decent race between him and Democrat rival Kamala Harris.
Trump on Tuesday defended his protectionist trade policies and other fiscal proposals in an interview with Bloomberg, dismissing suggestions that they might drive up the federal debt.
And he appeared to back away from previous comments that as president, he should give you the option to exert control over the Fed rate of interest decisions.
“I believe I even have the proper to say I believe you must go up or down slightly bit,” Trump said, referring to setting rates of interest. “I do not think I must be allowed to order it, but I believe I even have the proper to place in comments as as to whether or not the rates of interest should go up or down.”
How Trump plans to weaken the dollar, nonetheless, stays a little bit of mystery beyond his well-flagged tariff plans.
Key developments that ought to provide more direction to U.S. markets in a while Wednesday:
* US corporate earnings: Morgan Stanley, US Bancorp, Residents Financial, Discover Financial, Equifax, Synchrony, Prologis, Abbott Laboratories, CSX, PPG, Kinder Morgan, Steel Dynamics, Crown Castle
* US September import/export prices
* European Central Bank President Christine Lagarde speaks
(Editing by Bernadette Baum)