Investors are looking to the US Federal Reserve decision early Thursday AEST.
ASX futures were 12 points or 0.2 percent lower at 6685 at 8.00am AEDT, indicating a dip at the open.
Stocks on Wall Street fell Friday, ending a three-day streak of gains, after a few unexpectedly weak corporate earnings reports unnerved investors.
The S&P 500 declined 0.9 percent, a day after the broad market benchmark index had risen 1 percent and the Dow Jones Industrial Average had slipped 0.4 percent. The Nasdaq Composite fell 1.9%, pushed lower by a 39% plunge in Snap following the social-media app’s weakest quarter of sales growth as a public company. Tech titans Meta Platforms and Alphabet were down 7.6% and 5.6%, respectively. The week ended with all three indexes higher.
With a 2.5 percent gain for the week, the S&P 500 closed out its best week in a month. Still, few investors are willing to say that the selloff that has pulled the S&P 500 down 17% this year has definitely hit a bottom. A high level of inflation, the threat of recession and the war in Ukraine continue to be concerns for investors. A meeting next week of the Federal Reserve, in addition to looming gross domestic product data, could add further volatility to the markets.
“We had been seeing a better mood as of late,” said Kristina Hooper, the chief global market strategist at Invesco. “The earnings that we saw come out this week were not great, but they also weren’t abysmal.” Cause you know, come Friday, the ‘rose colored glasses’ came off,” she said.
In commodities, iron ore shot up 5.9% to US$104.55, Brent crude oil was down 0.6% to $US103.20 per barrel, gold slipped 0.2% to US$1,742.30 an ounce.
In local bond markets, the yield on Australian 2 Year government bonds was lower at 2.69% and the 10 Year yield was lower at 3.43%. Elsewhere, the US 2 Year Treasuries yields eased to 2.97%, while the yield on 10-year US Treasuries was at 2.75%.
Asia
Shares in China gave up early gains to finish lower on fears of new lockdowns as the country records more coronavirus cases. The blue-chip CSI300 index was also down 0.1%, and the Shanghai Composite Index 0.1% to 3,269.97 points, while the Shenzhen Composite shed 0.4% to 2,185.41 and Chinext lost 0.5% to 2,737.31. Near-term sentiment may get a lift from signals that China is easing the regulatory grip on internet giants. China’s cybersecurity regulator recently fined Didi Global $1.2 billion, closing a yearlong investigation about its cybersecurity practices. Energy shares were mostly down, as Yantai Jereh Oilfield Services lost 2.0% and Cnooc Energy Technology & Services lost 0.4%. Kweichow Moutai finished 0.4% higher after saying that it anticipates a year-over-year rise in its first-half net profit.
Shares in Hong Kong rose, led by the consumer-services sector, while property-related companies fell. Casino stocks rose on word that gambling venues in Macau can reopen on Saturday. Sands China rose 3.8% and Galaxy Entertainment gained 1.1%. The ongoing pressure on China’s property market also hit developers, with Country Garden and China Resources Land down 1.3 and 1.8 percent respectively. Construction-material companies were also hit. Shares of China National Building Material fell 7.4 percent and Anhui Conch Cement dropped 5.3 percent. The benchmark Hang Seng Index gained 0.2% to 20609.14, bringing gains this week to 1.5%.
Stocks in Japan closed higher, with electronics and shipping shares among the gainers, after worries abated somewhat about higher costs for fuel and borrowing. Keyence rose 3.0% and Renesas Electronics advanced 2.5%. Kawasaki Kisen Kaisha surged 11% after it lifted its full-year earnings outlook, saying shipping demand is robust. The Nikkei Stock Average added 0.4% to 27914.66. Earnings were in focus.
Europe
European stocks gained after investors weighed corporate earnings and news on the economy. The pan-European Stoxx Europe 600 was up 0.4 percent, the DAX in Germany rose 0.2 percent and the CAC 40 in France rose 0.2 percent.
New business surveys released on Friday suggested the eurozone economy shrank in July. Minus the pandemic lockdown months, that would be the first time purchasing managers’ indexes have signalled contraction since 2013.
Delivery Hero shares rose 12.8% after the online food delivery service reported higher second-quarter revenue and lifted its margin outlook. Norsk Hydro rose 6.2% after the aluminium maker proposed an additional dividend and a share buyback along with strong second-quarter results. Fortum Oyi is up 11.2% on reports that Germany is close to finalizing a deal to bail out Fortum's energy company Uniper.
London’s FTSE 100 closed 0.1% higher at 7276 points as the latest PMI data in the region failed to support initial concerns of an economic slowdown, says CMC Markets UK chief market analyst Michael Hewson in a note.
The market gains for the week seemed to be fueled by opinions that central bankers are not likely to hike rates as much as once thought, he says. “Certainly the weakness in commodity prices is helping investors to conclude this, but it still seems an incredibly premature conclusion, even as German 10-year yields hit their lowest levels since May,” says Hewson.
North America
US stocks fell Friday, breaking a three-day streak of gains after some surprisingly weak quarterly updates from companies spooked investors.
The S&P 500 dropped 0.9 percent a day after the broad benchmark index advanced 1 percent, and the Dow Jones industrial average slipped 0.4 percent. The Nasdaq Composite was down 1.9% after being led lower by a 39% drop in Snap after the social-media app reported its slowest quarterly sales growth as a public company. All three indexes ended the week up.
With a 2.5 percent gain for the week, the S&P 500 finished its best week in four weeks. Yet few investors are ready to call a bottom to a selloff that has pulled the S&P 500 down 17% so far this year. Inflation that is stubbornly high, the chance of a recession and the war in Ukraine remain at the top of investors’ minds. The Federal Reserve’s meeting next week, and gross domestic product numbers in the week ahead could bring further volatility to the market.
“We had been enjoying a better mood as of late,” said Kristina Hooper, chief global market strategist at Invesco. “Earnings reports earlier this week were not great, but they were also not terrible.” “On Friday, the ‘rose-colored glasses’ came off,” she said.
Megacap technology companies Meta Platforms and Alphabet retreated, sliding $13.90, or 7.6%, to $169.27 and $6.44, or 5.6%, to $107.90. American Express shares added $2.83, or 1.9 percent, to $153.01 after the company reported a 31 percent increase in profit.
Among other individual stocks, Twitter shares reversed earlier losses and gained 32 cents, or 0.8 percent, to $39.84 after the company reported a loss and said revenue had been hindered by uncertainty over Elon Musk’s eligible sale of a stake.
Companies in the S&P 500 are topping estimates for second-quarter earnings by 3.6 percent, FactSet finds, a figure that’s lower than the five-year average of 8.8 percent. With about 20 percent of the companies in the index having reported, 10 companies have issued earnings guidance for the third quarter that is below consensus estimates of profits, while one company has given a forecast that is ahead of Wall Street’s expectations.
“Into these earnings, guidance is everything on Wall Street,” said Michael Farr, CEO of Farr, Miller & Washington LLC. “There’s been a punishment of the companies who have missed earnings estimates, but they haven’t been punished as much as the ones who say they’re going to miss in the future.”
Verizon Communications’ shares dropped $3.21, or 6.7 percent, to $44.45 on Friday after the company warned that cash-strapped customers and tougher competition would weigh down its business in the months ahead.
Despite the declines on Friday, the S&P 500, the Dow and the Nasdaq are all up solidly on the week, providing a brief respite to investors whose portfolios have been battered this year. Some better-than-forecast earnings reports this week have emboldened investors to step in and buy beaten-down stocks. Netflix and Tesla were two companies that blew past Wall Street’s consensus, with its stock surging to make it one of the top two performers of the S&P 500 this week.
Some investors say they have re-entered the market in recent weeks to take advantage of bargains, suggesting the extreme bearish sentiment is often a contrarian indicator. This week, BofA Global Research reported “max bearish” sentiment among investors via its Bull & Bear Indicator.
There are so many metrics out there that show negativity in equities. “That’s been a good one for us to start with and it’s given us more confidence” to add to equity positions, said John Roe, head of multi asset funds at Legal & General Investment Management.
