US equity futures fell on Wednesday following disappointing quarterly results from tech groups Alphabet and Microsoft, both of which reported slower revenue growth across core parts of their businesses.
Google parent Alphabet reported a severe slowdown in its search ads business, sending its shares down as much as 6.1 per cent in pre-market trading. Microsoft’s stock was dented 5.3 per cent after it warned that revenue growth from cloud computing had fallen. Shares in Meta, which reports on Wednesday, were trading 3.5 per cent lower ahead of the New York open.
Contracts tracking Wall Street’s broad S&P 500 index were down 0.7 per cent on Wednesday, while those tracking the tech-heavy Nasdaq 100 fell 1.4 per cent. Investors are scouring corporate results for signs that high inflation rates and slowing economic growth have begun to weigh on earnings and forward guidance.
In Europe, the regional Stoxx Europe 600 index rose 0.3 per cent and Germany’s Dax added 0.6 per cent. The moves came as Deutsche Bank, the country’s largest lender, reported its highest third-quarter pre-tax profit since before the financial crisis, thanks in part to rising interest rates.
The European Central Bank will meet on Thursday and is widely expected to raise borrowing costs by 75 basis points for the second month in a row, to 1.5 per cent, to tame inflation that hit 10 per cent in the year to September.
The ECB warned on Wednesday that tighter monetary policy and falling consumer confidence had contributed to a big drop in demand for housing loans. However, demand for corporate loans rose over the same period as companies grappled with higher costs and falling demand.
Still, Gergely Majoros, a member of the investment committee at Carmignac, said falling prices for natural gas in Europe and hopes that the US Federal Reserve and ECB might begin raising rates at a slower pace in the fourth quarter and into the new year meant investors’ “short-term fears have abated quite a lot”.
Markets appeared to have reached an “inflection point”, Majoros said, adding that Carmignac had recently increased its exposure to equity and European fixed income markets. “We’re not at full speed just yet but it’s a change from the prudent stance we had over the last few months.”
London’s FTSE 100 index fell 0.3 per cent in early morning trading. Yields on 10-year gilts inched up 0.04 percentage points to 3.69 per cent, reflecting a drop in prices, while the 30-year gilt yield rose 0.1 percentage point to 3.79 per cent, close to levels last seen before the “mini” Budget announced by previous UK prime minister Liz Truss in late September.
Sterling added 1.1 per cent against the dollar to $1.16 in morning trading and 0.4 per cent against the euro to €1.155. One euro bought 86.5p.
Shares in Asia recovered, with indices in Japan, Hong Kong and China rising on Wednesday.