Tech giants call time on stocks party, U.S. payrolls loom
Sentiment hurt by weak earnings from U.S. tech giants
U.S. payrolls data coming up
By Naomi Rovnick and Stella Qiu
LONDON Feb 3 (Reuters) -A global stock rally, powered by hopes of central banks ending aggressive rate rises, ran into roadblocks on Friday following weak earnings from U.S. tech giants and as U.S. jobs data loomed.
The MSCI World Stock Index .MIWD00000PUS slipped 0.1%, but was still near its highest since August following a sharp rebound in recent weeks on hopes that the phase of rate hikes could benearing itsend.
Wall Street stock futures fell, with contracts on the tech-heavy Nasdaq 100 NQc1 1.5% lower, on disappointing earnings from Google GOOGL.O, Apple AAPL.O and Amazon AMZN.O. S&P 500 futures ESc1 slid 0.8%.
Investors are also watching the fallout from this week's plunge in shares of India's Adani group, which continued to nosedive on Friday with market losses amounting to $115 billion in the wake of a U.S. short-seller's report.
In Europe, the Stoxx 600 share benchmark fell 0.4%. Germany's benchmark 10-year bond yield DE10YT=RR inched almost8 basis points (bp) higher to 2.14%, having on Thursday dropped by the most since 2011 as prices shot higher.
This week, the U.S. Federal Reserve, the European Central bank (ECB) and Bank of England (BoE) all increased benchmark borrowing costs and warned of more hikes to come.
Markets initially shrugged off the hawkishness, however, and clung to a statement by Fed chair Jay Powell on Wednesday that the United States was in the early stages of "disinflation."
The mood turned much more cautious on Thursday, however, as U.S. tech shares took a beating in after-hours trading.
Apple projected another revenue decline in the start of the year, Amazon warned that its operating profit could fall to zero in the current quarter, and Google parent Alphabet missed fourth-quarter profit and revenue expectations.
The keenly watched U.S. non-farm payrolls report, due out on Friday, could now be crucial to supporting the recent stockrally.
"If we are seeing an easing of net job creation, that would allow the Fed to just do one more rate hike of 25 basis points and that would be the end of the cycle," said Willem Sels, global chief investment officer at HSBC's private bank.
"We will see headwinds from further earnings downgrades, but we have incorporated quite a lot (of this) already so I think markets can hold here if we are indeed right on the Fed."
U.S. job growth likely remained strong in January, with economists polled by Reuters expecting 185,000 new jobs created.
Hourly wages are predicted to have risen by 0.3% from the month before, although the unemployment rate is also forecast to have ticked up to 3.6% from 3.5%, which may give the Fed comfort that wage inflation could decline.
Alan Ruskin, macro strategist at Deutsche Bank, said that given the current market price action ahead of the U.S. payrolls data, a softer report would be regarded as endorsing all the favourite trades of the year.
"Not least it would provide the most important evidence to date to suggest that the market's rates pricing is more appropriate than the Fed's own more hawkish signalling," Ruskin said.
Futures markets favour another 25 bp hike from the Fed in March and imply that might be the end of thetightening cycle. They have also priced in two rate cuts by the end of this year, a scenario Powell dismissed. FEDWATCH
In currency markets, the euro EUR=EBS traded at $1.0934, pulling further away from Thursday's 10-month top of $1.1033.
Sterling GBP=D3 rose 0.3% to $1.2238, supported by an upward revision to services activity data, after tumbling 1.2% the previous session.
An index measuring the dollar against major currencies =USD stood at 101.56, just away from its nine-month low of 100.80.
Treasury yields held largely steady. The ten-year US10YT=RR was flat at around 3.39%, while the two-year US2YT=RR, which follows traders' expectations of higher Fed fund rates, was also flat at around 4.08%.
Brent crude LCOc1 futures meanwhile reversedearlier gains and dipped 0.2% to $81.98 per barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 was also down 0.2% at $75.73. O/R
Asia stock marketshttps://tmsnrt.rs/2zpUAr4
Additional reporting by Stella Qiu in SYDNEY, Editing by Dhara Ranasinghe, Toby Chopra and John Stonestreet
To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.