US markets
US equities sold off sharply on Wednesday, with sentiment being hurt by disappointing earnings reports and a resurgence of US Treasury yields. The bellwether S&P 500 sank 1.4 percent, the blue-chip Dow Jones Industrial Average dropped 0.3 percent, while the tech-heavy NASDAQ tanked 2.4 percent, dragged down by Alphabet after Google’s parent company reported downbeat results.
Nearly all the S&P sectors ended in negative territory, with communication services, consumer discretionary, and real estate being hit the hardest, while utilities and consumer staples eked out gains. The third-quarter earnings season started going up a gear. Among the biggest drags in the communication services, Alphabet plunged 9.5 percent after reporting disappointing cloud services revenue, refueling fears of an economic slowdown. Semiconductor stocks tumbled, with chipmaker Texas Instruments sliding 3.5 percent on a disappointing revenue forecast. Aircraft maker Boeing lost 2.5 percent after its earnings missed forecasts. Conversely, Microsoft climbed 3.1 percent after posting a better-than-expected quarterly report. Defense contractor General Dynamics climbed 4.0 percent after reporting a jump in third-quarter revenue.
The US housing market continued to show its resilience, with sales of new single-family houses increasing more than expected in September, despite elevated mortgage rates. New home sales surged to a 19-month high, driven by significant demand for new housing due to limited supplies of previously owned houses.
These price data reflect observations at market close: WTI spot crude oil gained by US$1.60 to US$85.99 while spot gold rose by US$13.50 to US$1,975.25. The US dollar strengthened vs. major currencies. The US Treasury 30-year bond yield rose by 13 basis points to 5.09 percent while the 10-year note yield rose by 11 basis points to 4.95 percent.
European markets
European equities held steady on Wednesday as investors adopted a wait-and-see approach in light of a mixed batch of corporate results and ahead of the European Central Bank’s (ECB) policy decision on Thursday. The Europe-wide STOXX index ended marginally higher, while the German DAX strengthened by 0.1 percent. The UK FTSE 100 and the French CAC 40 inched up by 0.3 percent each.
Among the sectors in the Europe-wide STOXX, health care, materials, financials, and utilities led the gains, while rate-sensitive real estate suffered the largest percentage losses. Mining stocks performed well as copper prices ticked up following China’s new stimulus measures. Major mining companies Antofagasta, Glencore, and Rio Tinto rose between 1.2 percent and 1.9 percent. However, luxury shares faced pressure, with industry leader Kering experiencing a 3.5 percent fall due to a larger-than-expected drop in third-quarter sales caused by weakening demand for high-end clothing and accessories. Peers LVMH, Richemont, and Pernod Ricard closed down between 0.1 percent and 0.9 percent. Among individual stocks, Worldline slumped 59.2 percent after the payment company unexpectedly downgraded its sales outlook, citing an economic slowdown that had affected its business. On the other hand, Deutsche Bank climbed 8.2 percent as the lender posted a better-than-expected third-quarter net profit and promised more share buybacks in the next two years.
On the economic data front, the ifo Business Climate Index showed that Germany’s business environment improved more than expected in October, marking the first increase in six months.
Asia Pacific markets
Asian equities mostly held onto their gains on Wednesday, following the positive trend in overseas markets.
Mainland China’s equities rose for a second consecutive day, with the CSI 300 index up 0.5 percent and the Shanghai index up 0.4 percent. China’s government surprised the markets on the upside by approving a plan to issue an additional 1 trillion yuan (US$137 billion) sovereign bond to boost economic growth. This move will expand the country’s budget deficit for 2023 to about 3.8 percent of GDP. Construction stocks outperformed on the issuance of extra sovereign debt for disaster relief and infrastructure enhancement efforts. Automobile stocks advanced on news that pre-orders for AITO, the Huawei-backed electric vehicle brand, exceeded 15,000 units.
In Japan, stocks extended their gains for a second session as investors engaged in bargain hunting, tracking the overnight gains in US markets. The Nikkei index rose 0.7 percent, and the broader TOPIX added 0.6 percent. Investors also held a positive outlook for the upcoming earnings season. Chip-related companies were among the top performers, with chip-making equipment manufacturer Tokyo Electron up 1.7 percent and chip-testing equipment maker Advantest up 2.9 percent. Automobile stocks were bought back after a dip in US Treasury yields eased worries about higher borrowing costs. Toyota Motor gained 1.6 percent, and Honda Motor rose 0.8 percent.
Taiwan’s TAIEX inched up 0.3 percent, while South Korea’s KOSPI slid 0.9 percent. In India, equities fell for the fifth consecutive session, with the BSE Sensex down 0.8 percent. Financials and technology stocks weighed down the index amid concerns over fluctuations in US Treasury yields and Middle East tensions.
Australian shares gave up early gains to end flat, with the All Ordinaries index finishing marginally higher. Strong inflation surprised the markets, with the consumer price index (CPI) rising more than expected by 1.2 percent in the third quarter, adding to the possibility of further rate hikes. Mining shares led the gains following China’s approval of additional fiscal measures. Major miners BHP Group and Rio Tinto jumped 2.6 percent and 2.4 percent, respectively. However, gold stocks tracked bullion prices lower amid easing nerves around the Middle East conflict, with gold producer Newcrest Mining losing 1.6 percent. Financials also closed lower as the country’s largest four banks slid between 0.4 percent and 1.3 percent.