Global markets may continue a weekly decline due to the intense selloff in blue chips, particularly in technology shares. However, the European markets showed more resilient movements than their US peers.
Most stock markets are likely to extend the weekly losses as disappointing company earnings have weighed on sentiment. While the tech sell-off continued on Wall Street, European markets were resilient towards the end of the week, particularly in Germany and the UK. Meanwhile, Asian equities have taken a hit from risk-off sentiment, which may lead to another negative close for the week.
Europe
The tech sell-off on Wall Street rippled through the European markets, while some major companies disappointed investors with their quarterly earnings. However, equities in Germany and the UK outperformed, potentially due to being seen as safe havens amid the US market turmoil. On a weekly basis, the Euro Stoxx 600 fell by 0.86%, the CAC 40 slid by 1.43%, the DAX was up by 0.70%, and the FTSE 100 rose by 0.38%.
Earnings from the Eurozone’s biggest banks, including BNP Paribas, Deutsche Bank, Santander, and UniCredit, painted a mixed picture. While high interest rates continued benefitting these big lenders, their guidance stalled due to economic concerns. The Stoxx Europe 600 Bank index rose 0.46% in the past five trading days. The French flag lender, BNP Paribas, reported earnings strongly beat analysts’ estimates, with its shares up 1.85% from last week. The bank’s net income jumped 21% from a year ago. Its equity markets revenue surged by 58% year on year, while the retail business declined, with the net interest income down by 11%. Germany’s Deutsche Bank booked a quarterly loss due to a previously flagged provision from the Postbank takeover litigation. The bank’s shares fell 0.79% over the past five trading days.
In luxury consumer stocks, LVMH reported earnings that missed market expectations due to a sales slump in Asia, excluding Japan. On the other hand, Hermes weathered the global economic headwinds and reported a 13% jump in sales in the second quarter. The results showed that demand from wealthy buyers remained strong despite softening global consumer power. However, shares of LVMH and Hermes both slid for the week because of souring market sentiment, down 6.58% and 3.04%, respectively.
In the technology sector, shares of the Dutch chip equipment maker, ASML, extended the weekly losses, down 6.58%. In contrast, SAP jumped 6.39% following a strong second-quarter result. The German tech giant reported total revenue of €8.29bn, up 10% year on year, thanks to its cloud business, which increased 25% from a year ago.
TotalEnergies reported earnings that missed analyst expectations with a 6% year-on-year revenue drop in the second quarter due to faltering demand in Europe and lower prices. Its shares were down 1.78% from last week.
In the UK, AstraZeneca reported second-quarter earnings that topped market expectations. However, its shares slipped following the result as investors looked for a stronger performance. On a weekly basis, the British pharmaceutical firm’s shares were down 2.08%.
In currencies, the Euro and the British pound weakened against the US dollar this week. The dollar strengthened following Biden’s withdrawal from the presidential race as markets priced for a Trump win in the election. Risk-off sentiment also buoyed the king dollar against other major currencies.
Wall Street
The US stock markets are heading for the third consecutive weekly losses due to the tech wreck. Disappointing earnings from Tesla and Alphabet have added to the downside pressure in blue-chip stocks, while small-cap stocks were resilient, thanks to growing bets for the Fed to cut interest rates as soon as September. Over the past five trading days, the Dow Jones Industrial Average fell 0.87%, the S&P 500 was down 1.92%, the Nasdaq composite slid 3.08%, and the small-cap benchmark, the Russell 2000, rose 1.67% on a weekly basis.
At the sector level, nine out of the eleven sectors were in the red from a week ago, with technology, communication services, and consumer discretionary, leading losses, all down by more than 4% over the past five trading days. On the other hand, utilities and healthcare outperformed, up 0.73% and 0.62%.
Tesla’s shares slumped 11.63% weekly due to its disappointing second-quarter earnings. The electric car maker reported a decline in its automotive sales revenue for the second straight quarter due to weakened demands. Alphabet fell 5.6% from last week as its YouTube advertising revenue failed to satisfy investors.
Other companies in the group of the Magnificent Seven also extended losses, with Microsoft down 5%, Nvidia sliding 7.28%, Amazon falling 2.12%, Meta slipping 4.72%, and Apple down 3% over a five-day trading period.
The US dollar strengthened against other currencies in the G-10 group, except for the Japanese Yen. Risk-off sentiment buoyed the greenback, while currency traders expected Japan to intervene in the exchange rate. Additionally, commodity currencies experienced a sharp decline due to sliding metal and energy prices.
Asia Pacific
Stock markets across the Asia Pacific region are in a sea of red, with the Japanese markets leading losses. The Nikkei 225 tumbled more than 5% for the week as the Japanese Yen continued to strengthen. The Yen surged roughly 4.7% against the US dollar in the past two weeks as markets anticipated the Bank of Japan may tighten its monetary policy next week. There were also growing bets for an exchange rate intervention.
The Chinese stock markets deepened losses due to a sharp decline in Chinese tech companies and car makers, mirroring the selloff in the US markets. The Hang Seng Index fell to a three-month low after losing more than 2% this week. Following the weaker-than-expected GDP data in the second quarter, the People’s Bank of China unexpectedly lowered its 1-year medium lending facility rate by 0.2% to 2.3%, the deepest rate cut since the pandemic in 2020. It also cut the deposit rate in the big four banks to stimulate consumer spending.