Home ›› 30 Oct 2021 ›› Stock
Amazon and Apple earnings curbed enthusiasm for global equities on Friday, though the euro held near one-month highs on euro zone rate rise hopes.
Amazon.com reported a slump in profit late on Thursday that it expects will continue through the holiday quarter, as higher pay to attract workers and other operational disruptions diminish the company’s windfall from online shopping.
Supply chain woes cost Apple $6 billion in sales during the company’s fiscal fourth quarter, which missed Wall Street expectations, and Chief Executive Tim Cook said the impact would be even worse during the holiday sales quarter.
“Amazon and Apple are suggesting demand is strong but wage pressure is there, they won’t be able to deliver what they want for Christmas,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “That’s affecting equities somewhat negatively.”
S&P futures dropped 0.47 per cent and Nasdaq futures were down 0.84 per cent, indicating a lower open on Wall Street, after the indices hit record closing highs on Thursday.
The tech gloom hit European stocks, which were down 0.42 per cent.
The MSCI world equities index dipped 0.22 per cent to 745.36, but broader optimism about economic recovery has put it on course for gains of 5 per cent in October, within sight of record highs of 749.16 set last month.
Chinese blue chips bucked the trend and were up 0.92 per cent, but an index of Chinese real estate firms lost 3.5 per cent, and was down nearly 12 per cent on the week, the most since February 2018.
Chinese developers are struggling with liquidity problems, and proposals to trial a property tax is not helping sentiment even as regulators seek to contain the fallout centred around embattled China Evergrande Group.
Evergrande’s shares lost 3.7 per cent on Friday despite news it had met its second dollar-bond repayment obligation this month.
Japan’s Nikkei rose 0.25 per cent ahead of Sunday’s lower house election in which the ruling party is expected to lose seats but the coalition government should remain safe.
Inflation Watch
The issue of rising prices and central banks’ response was driving currency and bond markets.
Data on Friday showed inflation in the 19 countries sharing the euro rose to 4.1 per cent in October from 3.4 per cent a month earlier, beating a consensus forecast of 3.7 per cent. That reading is the highest since 2008 and equals the all-time-high for the time series launched in 1997.
However, the euro zone economy also grew by a quicker-than-forecast 2.2 per cent in the third quarter, its fastest pace in a year and putting it on course to reach its pre-crisis size before the end of the year.
The euro fell 0.25 per cent to $1.1650 after hitting a one-month high on Thursday as comments by European Central Bank President Christine Lagarde were interpreted in some quarters as not going far enough in affirming the central bank’s dovish stance.
Euro zone bond yields jumped, with Italian 10-year yields rising as high as 1.165 per cent on Friday, their strongest since July 2020.
Markets are pricing in two ECB rate hikes by December 2022.
“Market expectations of 2022 rate hikes are incompatible with the ECB’s intentions, but President Lagarde did not push back as much as the market required,” Rabobank analysts said in a note.
“It seems we will have to wait until the December meeting, where nothing will probably change, for the market to grasp this better.”
