US markets
US equities fell for a second straight session on Thursday as investors remained cautious amid mixed quarterly earnings and signs of economic resilience which raised concerns over the Federal Reserve (Fed)’s restrictive monetary policy. The bellwether S&P 500 sank 1.2 percent, the blue-chip Dow Jones Industrial Average dropped 0.8 percent, while the tech-heavy NASDAQ tanked 1.8 percent.
The US economy expanded faster-than-expected at an annualized 4.9 percent rate in the third quarter, supported by strong consumer spending. Separately, data showed that the number of initial claims for unemployment benefits rose slightly more than expected last week. Both reports seemed to affirm that the Fed will likely hold interest rates higher for a longer period.
Most of the S&P sectors ended in negative territory, with communication services and information technology hit hardest, while real estate, utilities, and materials made up the rare gaining group. Mega-cap stocks dragged the markets lower due to gloomy corporate forecasts and expectations of ‘higher-for-longer’ interest rates. Facebook’s owner Meta Platforms slid 3.7 percent after forecasting weaker advertising demand and higher-than-expected spending despite beating results for the third quarter. Google’s parent company Alphabet, down 2.7 percent, saw its second straight day of declines after its results failed to impress on Tuesday. E-commerce giant Amazon.com lost 1.5 percent ahead of its report due after the market close. Chipmaker Western Digital tumbled 9.3 percent as its merger talks with Japan’s Kioxia were called off. Logistics firm United Parcel Services sank 5.9 percent after cutting its revenue forecast for 2023. Conversely, IBM climbed 4.9 percent on an upbeat quarterly report, supported by solid demand for its software solutions.
These price data reflect observations at market close: WTI spot crude oil dropped by US$2.18 to US$83.81, while spot gold rose by US$5.00 to US$1,980.25. The US dollar strengthened vs. major currencies. The US Treasury 30-year bond yield fell by 10 basis points to 4.99 percent while the 10-year note yield fell by 11 basis points to 4.85 percent.
European markets
European equities recouped early losses on Thursday after the European Central Bank (ECB) kept its interest rates steady as expected, while a slew of pessimistic earnings weighed on market sentiment. The Europe-wide STOXX fell 0.5 percent, the German DAX slid 1.1 percent, the French CAC 40 dipped 0.4 percent, and the UK FTSE 100 lost 0.8 percent.
The ECB kept its key interest rates unchanged during its October meeting, as widely expected. This marks a significant shift from its 10 consecutive rate hikes since July 2022, considering the gradual easing of price pressures and concerns over an impending recession. Nevertheless, the central bank insists that a discussion of rate cuts is still premature and will maintain interest rates at elevated levels for a sufficiently extended period until inflation falls back to its 2.0 percent target over the medium term.
Among the Europe-wide STOXX sectors, consumer discretionary and health care suffered the biggest percentage drop, while real estate and materials held up best. Sentiment took a hard hit after a batch of earnings highlighted the impact that elevated interest rates have on corporate performance. Health care stocks were pressured by a 10.0 percent fall in Straumann after the dental implants maker’s US peer Align Technology cut its full-year revenue forecast. Banks also weakened amid downbeat earnings. Standard Chartered slumped 12.4 percent after reporting a sharp drop in third-quarter pre-tax profit, while a fall in trading revenue in the third quarter pushed BNP Paribas down 2.6 percent. Other major banks such as HSBC and Lloyds fell more than 0.7 percent. Conversely, BE Semiconductor surged 13.0 percent, as the company’s third-quarter orders jumped 13.1 percent from the second quarter and gross margin beat estimates.
Asia Pacific markets
Most Asian markets lost ground on Thursday, tracking a sharp pullback on Wall Street overnight amid disappointing corporate earnings results and rising Treasury yields. However, Chinese stocks closed higher as authorities stepped up efforts to boost economic recovery.
Mainland China’s equities rose for a third session in a row amid optimism around the latest round of stimulus measures, including state fund buying and additional sovereign debt issues. China’s CSI 300 index firmed 0.3 percent, and the Shanghai index added 0.5 percent. Automobile stocks continued their upward trend. Utilities stocks advanced after the economic planning agency National Development and Reform Commission released guidance on strengthening the stability of the power system. Hong Kong equities struggled to maintain their gains amid weak investor sentiment. The Hang Seng index dipped 0.2 percent.
Japanese stocks pulled back after two consecutive sessions of gains. Caution prevailed amid uncertainty over business outlooks issued by US technology giants. The Nikkei index sank 2.1 percent, and the broader TOPIX slid 1.3 percent. Semiconductor-related stocks weighed heavily on the markets following the selloff in the US overnight. Chip-testing equipment maker Advantest tumbled 6.9 percent, and chip-making equipment manufacturer Tokyo Electron lost 5.0 percent. Real estate stocks were among other worst performers. Japanese 10-year government bond yields rose to a decade high, sparking worries about higher borrowing costs. Developer Mitsui Fudosan dropped 3.2 percent, and Mitsubishi Estate tanked 2.4 percent.
Taiwan’s TAIEX shed 1.7 percent. South Korea’s KOSPI sank 2.7 percent. Indian equities fell for a sixth session, with the BSE Sensex down 1.4 percent, amid pressure from elevated US Treasury yields and concerns over the Middle East conflict.
Australian shares snapped a two-session rising streak, with the All Ordinaries index off 0.6 percent. Investors were wary of the unexpectedly strong third-quarter inflation data and a renewed spike in US Treasury yields. Technology shares tracked their US peers lower, with Megaport tumbling 16.3 percent. Financials extended losses, with the country’s four largest banks sliding between 0.2 percent and 1.1 percent. Gold stocks declined, with Newcrest Mining falling 1.6 percent. Investors shifted away from safe-haven assets as global leaders were seeking opportunities to prevent the widening of the Middle East conflict. Bucking the downward trend, mining stocks eked out modest gains after iron ore prices rose on the back of China’s policy support, with major miners BHP Group up 0.5 percent and Rio Tinto up 1.2 percent.