Stocks flop on feeble earnings reports, yen at seven-week high
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[July 24, 2024] By
Lawrence White
LONDON (Reuters) - Stocks sagged worldwide on Wednesday as earnings from
Tesla, Alphabet as well as European luxury brands disappointed, while
the yen surged to a seven-week high ahead of a central bank meeting next
week.
The U.S. dollar was broadly steady, with traders watching out for an
inflation reading on Friday and a Federal Reserve meeting next week.
The pan-European STOXX 600 index slipped 0.8% to 512.3 points as of 0800
GMT. That was led by a 2% slump in the personal and household goods
sector after the world's biggest luxury group LVMH reported slower sales
growth as Chinese shoppers rein in their spending.
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4%,
while Japan's Nikkei fell 1%.
The dour mood looked set to continue in the United States. Nasdaq
futures slid 1% and S&P 500 futures were 0.7% lower after Tesla reported
its smallest profit margin in more than five years, weighing on other EV
stocks.
"The interim results season is kicking off on both sides of the Atlantic
and, so far, investors are underwhelmed by what they have seen," said
Steve Clayton, head of equity funds, Hargreaves Lansdown.
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Shares of Google-parent Alphabet slipped in after-hours trade even as
the firm beat revenue and profit targets.
"Investors queried whether the vast sums being invested into Google's AI
capabilities were actually earning a return," Clayton said.
Subdued stock trading globally was symptomatic of markets looking for
direction, with traders digesting a range of themes including the U.S.
election, expectations of rate cuts, and weak corporate earnings
reports.
U.S. GDP data on Thursday and personal consumption expenditure data -
the Fed's favoured measure of inflation - on Friday could help investors
calibrate their expectations of when interest rates might be cut.
Markets are pricing in 62 basis points of easing this year, with a cut
in September priced in at 95%, the CME FedWatch tool showed.
A growing majority of economists in a Reuters poll said the Fed will
likely cut rates twice this year, in September and December, as
resilient U.S. consumer demand warrants a cautious approach despite
easing inflation.
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A man walks past an electric screen displaying the current Japanese
Yen exchange rate against the U.S. dollar outside a brokerage in
Tokyo, Japan March 21, 2024. REUTERS/Issei Kato/File photo
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"The U.S. consumer has remained extremely strong ... but you're
starting to see a degree of fragility underlying some of the data,"
said Luke Browne, head of asset allocation for Asia at Manulife
Investment Management.
YEN RIDE
The yen spiked to its highest in seven weeks of 154.36 per dollar
after surging nearly 1% on Tuesday, having languished near a 38-year
low of 161.96 at the start of the month. It was last up 0.56% at
154.73.
Traders are focused on a Bank of Japan meeting next week, where a 10
basis point hike is priced at a 44% chance. [FRX/]
Traders suspect Tokyo intervened in the currency market in early
July to yank the yen higher, with estimates from BOJ data indicating
authorities may have spent roughly 6 trillion yen ($38 billion).
The suspected bouts of intervention have led speculators to unwind
popular and profitable carry trades, in which traders borrow the yen
at low rates to invest in dollar-priced assets for a higher return.
The yen was higher against other currencies too, touching a more
than one-month highs against the pound and the euro and a two-month
high against the Australian dollar. [AUD/]
The dollar index, which measures the U.S. currency against six
rivals, was little changed at 104.53. The index is down 1.3% this
month.
In commodities, oil prices rose on easing U.S. crude inventories.
Brent crude futures for September rose 0.51% to $81.52 a barrel,
while U.S. West Texas Intermediate crude for September gained 0.65%
to $77.46 per barrel.
($1 = 155.3600 yen)
(Reporting by Lawrence White in London and Ankur Banerjee in
Singapore; Editing by Christopher Cushing, Sam Holmes and Edwina
Gibbs)
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