US equity futures dropped along with European stocks following mixed corporate earnings and as investors studied the latest assessment on the US economy for clues on the path for interest rates.
(Bloomberg) — US equity futures dropped along with European stocks following mixed corporate earnings and as investors studied the latest assessment on the US economy for clues on the path for interest rates.
Contracts on the S&P 500 fell about 0.7% and those on the Nasdaq 100 were down more than 1%. Tesla slumped as much as 8.5% in premarket trading after the electric-vehicle maker signaled more price cuts even as first-quarter results showed narrowing profit margins. Apple Inc. declined after its most important chipmaker warned that demand from the mobile and PC industries would remain “soft” for now.
Autos led declines in the Stoxx Europe 600 index as Renault SA fell the most in almost five months, with concerns over pricing pressure outweighing the French carmaker’s first-quarter sales beat. Germany’s DAX underperformed as other auto- and partsmakers fell. L’Oreal SA gained after the cosmetics maker reported strong demand.
The Federal Reserve’s monthly Beige Book survey released on Wednesday showed the US economy “stalled,” with narrower access to credit. Federal Reserve Bank of New York President John Williams said the recent trend of slowing inflation continues but that price gains remain too high. Trader bets continue to lean toward a rate hike next month.
A measure of dollar strength was steady, while Treasury yields dropped.
“Inflation is not going to go away by itself,” Marija Veitmane, senior multi-asset strategist for State Street Global Markets, said in an interview with Bloomberg Television. “It’s really a question of whether the Fed has enough resolve to break the economy to get inflation down and right now it seems that they still do.”
Elsewhere on the monetary policy front, European Central Bank Governing Council member Klaas Knot said the ECB may need to follow a widely expected hike next month by raising rates in June and July. There has to be “a convincing reversal” in price pressures before a pause in the tightening cycle, he said.
“We’re now at a pivotal point in the tightening cycle, one made all the more difficult by the mini-banking crisis last month and the ripple effects it will have on credit and the economy,” said Craig Erlam, a senior markets analyst at Oanda Europe Ltd. “It’s this uncertainty that appears to be driving the most recent period of choppy trading.”
Investors were also digesting mixed earnings out of the US and elsewhere. International Business Machines Corp. and Morgan Stanley beat forecasts. In Asia, Taiwan Semiconductor Manufacturing Co. forecast worse-than-anticipated revenue for the current quarter, reflecting a persistent slump in demand for everything from smartphones to server chips.
Banks in China kept loan prime rates unchanged after the People’s Bank of China stayed put. An independent review of Australia’s central bank recommended setting up an expert policy board and fewer meetings followed by press conferences.
Bitcoin dropped below $29,000. Oil fell while gold edged higher after a Wednesday decline pushed the precious metal below $2,000 an ounce.
The drop for US equity futures followed a flat day in New York trading. The CBOE VIX index of volatility to the lowest since 2021. A Bank of America global measure of volatility spanning stocks, rates, currencies and commodities sits at the lowest level since early 2022.
Key events this week:
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- S&P 500 futures fell 0.7% as of 6:23 a.m. New York time
- Nasdaq 100 futures fell 1%
- Futures on the Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0959
- The British pound fell 0.1% to $1.2425
- The Japanese yen was little changed at 134.63 per dollar
Cryptocurrencies
- Bitcoin fell 1.5% to $28,811.8
- Ether fell 1.4% to $1,953.1
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.55%
- Germany’s 10-year yield declined five basis points to 2.47%
- Britain’s 10-year yield declined four basis points to 3.82%
Commodities
- West Texas Intermediate crude fell 1.8% to $77.71 a barrel
- Gold futures rose 0.2% to $2,012.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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