Futures fell ahead of the busiest day of the earnings season, dragged down by META and MSFT which are both down about 4% following last night’s earnings releases. As of 8:00am ET S&P futures are down 0.6%, but off session lows; Nasdaq futures retreat about 0.7% after Microsoft and Meta growth outlooks fail to impress investors, with the pair together representing half of the losses in Nasdaq futures. The rest of Mag7 is also lower: AMZN, GOOG, NVDA are all down 1% - 1.4%. AAPL, which had been used as a funding source is -33bps. Bond yields are flat to down 1bps; the USD is flat. Cmdtys are getting hit with the global risk-off tone, but WTI is higher while Brent is lower. The macro data focus today is on ECI, Income/Spending, jobless claims, and the monthly PCE numbers. Mag7 earnings conclude (ex-NVDA which is Nov 20) with AAPL and AMZN.
In premarket trading, Microsoft shares dropped 3.6% after the software giant forecast slower quarterly cloud revenue growth. Morgan Stanley notes that supply constraints are continuing to limit growth in the GenAI-related businesses. Meta Platforms shares fall 2.6% after the Facebook parent reported third-quarter results. Analysts are broadly positive, but note that capital expenditure plans did raise concerns. Among other premarket stock movers, Uber slumped following a muted holiday forecast for the ride-hail service. Estee Lauder Cos. Inc. tumbled 18% after the cosmetics maker pulled its guidance for the year. EBay Inc. dropped after missing revenue forecasts. Comcast Corp. jumped after a profit beat. Here are all the notable premarket movers:
The disappointing set of results from Microsoft and Meta was hurting sentiment, said Marija Veitmane, a senior multi-asset strategist at State Street Global Markets. Investors are questioning whether the companies can sustain profit growth while ramping up spending on artificial intelligence and cloud services.
"The market is concerned with the continued increase in investments, and that is likely to weigh on stocks in the short term,” she said. “In the medium term, however, we still see weakness in tech stocks as a buying opportunity. It’s a very crowded position, so it is getting sold on any sign of disappointment, but we always see investors coming back as there’s no other alternative if you want quality."
The dollar and treasuries were steady (more below) , with the two-year Treasury yield, which is most sensitive to interest-rate moves, hovering at a three-month high. In addition to the resilient US economy, investors are worried that a resurgence in inflation after the US election may delay or prevent interest-rate cuts.
“Who becomes president changes the perspective of the investment cycle,” Daniel Yoo, head of asset allocation, Yuanta Securities, said on Bloomberg Television, highlighting the potential effects of higher tariffs and lower corporate taxes under a potential Donald Trump presidency. “That will probably accelerate the process of inflation pressure and therefore the lowering of interest rates may be taken at a slower pace or not even happen.”
In Europe, the Stoxx 600 retreated for a third day after its worst day since September and on track for its biggest monthly decline in a year. French lender BNP Paribas SA was the biggest drag on the index, plunging more than 7% after reporting third-quarter earnings. Peers BBVA SA, Banco Sabadell SA and ING Groep NV also dropped after their results. Societe Generale SA stood out among lenders, soaring 11% after beating estimates. Here are some of the biggest movers on Thursday:
Earlier in the session, shares in Japan, Australia and South Korea declined, weighing on an index of the region’s equities, which headed for its worst monthly performance since August 2023. Mainland Chinese shares were mixed and those in Hong Kong rose, after a report showing monthly Chinese manufacturing data registered its first expansionary reading since April. Kospi drops almost 1% after Samsung chip profit disappoints. Hang Seng climbs 0.5% and mainland indexes advance after Chinese factory activity unexpectedly expands. The BOJ kept its benchmark interest rate unchanged after uncertainties increased over the outlook of the economy and the stability of the government after the ruling coalition suffered its worst electoral result since 2009. The yen strengthened below 153 per dollar.
In rates, treasuries advance across the curve in a moderate bull-flattening move, with 5s30s spread back to tightest level since July. US yields richer by as much as 3bp across the curve with 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day; 10-year near 4.28% is ~2.5bp richer on the day with UK 10-year underperforming by around 8bp. European bonds dipped after data showed euro-area inflation accelerated more than expected in October — matching the ECB's target and boosting arguments for interest rates to be lowered gradually. Treasuries also sharply outperform gilts as UK financial markets absorb Labour government’s plans for increased borrowing and fiscal stimulus. UK front-end yields are up about 10bp in an aggressive bear-flattening move as money markets unwind the extent of Bank of England interest-rate cuts expected in 2025. UK 10-year yields rose another 6 bps to 4.41% - the highest since November 2023. Bunds also fall, albeit to a lesser extent. German 10-year yields rise 2 bp to 2.40% with little reaction to an upside surprise in euro-area headline and core inflation for October. US session includes employment cost index, weekly jobless claims and PCE price indexes.
In FX, the dollar slipped, though it remains on pace for its best month in more than two years as investors trimmed bets on Fed policy easing after robust economic-growth and jobs data Wednesday. One-week implied volatility on the Bloomberg Dollar Spot Index rose to the highest since December 2022, indicating that traders expect wild swings in the greenback over the US presidential election. The Japanese yen topped the G-10 FX leader board, rising 0.7% against the greenback after the BOJ left rates on hold and maintained it’s on track to achieve its inflation target.
In commodities, oil edged higher, extending its gains from the previous session; WTI rose 0.7% to $69.10. Gold dropped after touching a fresh record in the prior session; spot traded down $6 to $2,781/oz. Demand for the precious metal was partly supported by the uncertainty posed by next week’s vote.
Looking at today's calendar, US economic data calendar includes October Challenger job cuts (7:30am), 3Q employment cost index, September personal income and spending with embedded PCE price indexes, jobless claims (8:30am) and October MNI Chicago PMI (9:45am, several minutes earlier to subscribers). Fed officials are in self-imposed quiet period ahead of Nov. 7 policy announcement.
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APAC stocks were mixed albeit with most major indices subdued following the negative handover from the US and heading into month-end, while participants also digested a slew of data releases including somewhat mixed Chinese PMIs. ASX 200 declined amid losses in utilities and consumer stocks with retailer Coles pressured after its quarterly update. Nikkei 225 briefly dipped beneath the 39,000 level after mixed data and cautiousness heading into the BoJ announcement which lacked any major fireworks as the central bank kept rates unchanged as expected and refrained from any fresh policy clues. Hang Seng and Shanghai Comp were underpinned with earnings in focus and strength in Chinese banks after the Big 4 registered profit growth, although the upside was limited in the mainland after the mixed PMI data which showed manufacturing activity topped estimates and printed at a surprise expansion although non-manufacturing missed forecasts.
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European bourses, Stoxx 600 (-0.7%) began the European session entirely in the red, and continued to traverse worse levels throughout the morning. European sectors hold a strong negative bias; Construction & Materials takes the top spot whilst Retail is found at the foot of the pile. US Equity Futures (ES -0.8% NQ -1.1% RTY -0.4%) are entirely in the red, with sentiment hit following post-earning losses tech heavyweights Meta (-3.8%) and Microsoft (-3.8%).
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DB's Jim Reid concludes the overnight wrap
Happy Halloween to you all. If you want to be scared I’m going to a Halloween themed fancy dress party tomorrow night as Marilyn Manson. The PVC trousers have arrived from Amazon and my wife is licking her lips at applying make-up to me! There’s been lots of tricks and treats for markets over the last 24 hours with some of the highlights being a -22.3% drop for the Trump Media and Technology group, a 10-13bps rise in 2yr European yields and a 15bps climb in Gilt yields off the lows for the day across the curve after the budget. Just as it looked like US moves were going to be tame by comparison a late sell-off encouraged US 2yr yields +8.6bps on the day. It's a big day today with US PCE inflation, a continuation of European inflation numbers that helped move markets yesterday, and Apple and Amazon reporting after the closing bell.
The big move in Trump’s media group was partly down to fresh CNN polls which showed Harris with sizeable +5pt and +6pt leads in the swing states of Michigan and Wisconsin, although still tied with Trump in Pennsylvania. These stronger polls saw the FiveThirtyEight model’s probability of a Trump victory decline to 51% from 54% the day before, while the odds on Polymarket fell from 67% to 64%. To be fair, much of the decline in Trump Media may have reflected its sharp recent rise (+324% from the low in late September), with a large correction always possible after such a run up in a short space of time. The reversal in other Trump proxy trades was more modest, with Bitcoin down -1.14%.
Over in Europe, the big moves followed stronger-than-expected GDP and inflation data. The first showed euro area GDP growing by a solid +0.4% quarter-on-quarter in Q3 (vs. +0.2% expected), with upside surprises in Germany (+0.2% vs -0.1% expected), France (+0.4% vs +0.3%) and Spain (+0.8% vs +0.6%) outweighing the downside in Italy (0.0% vs. +0.2% expected). On the inflation side, Germany’s flash inflation print for October saw the harmonised HICP measure come in at +2.4% yoy (vs. +2.1% expected). Following this upside surprise, our European economists see today’s euro area release tracking at 1.96% yoy for headline HICP and 2.69% yoy for core, nearly a tenth higher than they expected prior to yesterday.
The stronger data saw hawkish-leaning ECB officials speak in favour of only gradual easing, with Schnabel saying that “a gradual approach to removing policy restriction remains appropriate”, while Nagel commented that “my advice is to remain cautious and not to rush”. Market pricing of a 50bps rate cut by the ECB in December fell from 41% to 20% yesterday, with -11.2bps of cuts priced out over the next three meetings in total. 2yr bund yields (+11.5bps) posted their largest increase in over three weeks, with OATs (+11.0bps) and BTPs (+12.5bps) seeing similar moves. At the long-end, 10yr bund yields (+5.1bps) rose to their highest in three months at 2.39%, while 10yr BTPs (+7.5bps) underperformed after the weak GDP data there.
Stronger data also helped to put upward pressure on US yields, albeit after an initial false start. 2yr and 10yr Treasury yields ended the day +8.6bps and +4.6bps higher, respectively, with the 10yr reaching 4.30% for the first time since early July. It's dipped back to 4.276% this morning in Asia. The highlight of the data was a strong rise in the ADP employment survey (+233k vs +111k expected) ahead of Friday’s payrolls release. We also had Q3 GDP, which came in a touch beneath expectations (+2.9% vs +2.8%) but with strong growth in personal consumption (+3.7% vs +3.3% expected), and the September pending home sales print, which saw the strongest monthly jump since the first post-Covid lockdown rebound in summer 2020 (+7.4% vs. +1.9% expected).
Here in the UK, gilts actually outperformed the euro area and the US with yields ‘only’ 3-5bps higher across the curve. That was mostly thanks to a decline early in the day before the budget announcement. However, 2yr yields then rose as much as 24bps off the lows at one point, with long-end yields rising only slightly less. This came as the market digested a post-budget announcement from the UK Debt Management Office that gross financing needs for 2024/25 would be GBP 23bn higher than projected back in April, with a further GBP 145bn cumulative increase over the following 4 years. Yields settled back down 5 to 10bps from the highs before the close but it was certainly a volatile session. In terms of implications for the BoE, the market takeaway was that it would likely keep rates higher for longer with the June 2025 pricing rising by +15.9bps on the day.
Our UK economist Sanjay Raja notes that this is very much a historic budget in its scale, with announced net spending measures adding up to GBP 70bn a year on average over the next five years, partially offset by GBP 36bn a year in net tax increases. All up, this marks one of the largest fiscal loosening of any UK fiscal event in decades. See Sanjay’s full reaction piece here.
Equities had a relatively challenging session, amid a rout for chipmakers that saw the Philadelphia semiconductor index fall by -3.35%. That had some specific drivers, with Advanced Micro Devices falling -10.62% after its underwhelming results the previous evening, while server maker Super Micro Computer fell by -32.7% after its auditor resigned from its role, citing “integrity” concerns. The NASDAQ fell by -0.56%, though the Mag-7 (-0.02%) was essentially unchanged, helped by Alphabet’s +2.82% rise after its results. And US equities did not fare too badly otherwise, with 49% of the S&P 500 stocks higher on the day, as financials (+0.42%) and real estate (+0.39%) outperformed amid the stronger data. Over in Europe, tech losses led more substantial declines, with the Stoxx 600 (-1.25%) seeing its weakest session in over a month as all of its 25 industry groups fell on the day.
After the US market close, earnings reports from Microsoft and Meta added to the more negative tech mood. Microsoft delivered an upbeat Q3 performance, but announced a weaker forecast for cloud revenue growth, while Meta’s narrow beat was overshadowed by its warning of still rising losses from its Reality Labs division that focuses on AI and augmented reality. Both stocks fell by between -3% and -4% in after-hours trading. This morning, the Nasdaq 100 futures are -0.71%, underperforming S&P 500 (-0.50%).
In the commodity space oil prices rose by more than 2% yesterday following a Reuters report that OPEC+ could delay the oil output hike planned for December and EIA data showing a decline in US stockpiles of crude and refined products.
Overnight in Asia, most main equity indices are struggling with the Nikkei 225 (-0.43%) and the Kospi (-1.16%) trailing Chinese markets as the CSI 300 (-0.03%) and the Hang Seng (+0.15%) manage to slightly outperform. In terms of macro events, there was a hold from the BoJ overnight, with the yen subsequently strengthening, as well as an upbeat official manufacturing PMI print from China, with the gauge moving back above 50 (50.1 vs 49.9 expected) for the first time since April, while the non-manufacturing index showed a small miss (50.2 vs 50.3 expected).
Looking to the day ahead, in terms of US data we will have the personal income and spending data for September, including the PCE inflation print, as well as the Q3 employment cost indicator and the weekly jobless claims. In Europe, we get the October inflation prints for France, Italy and the euro area, while ECB’s Panetta and BoE’s Breeden are due to speak. In earnings, Apple and Amazon will round off this week’s Mag-7 releases, with Mastercard, Uber, Merck and Intel other highlights in the US. In Europe, earnings include AB Inbev, TotalEnergies and AP Moller - Maersk.