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. read more
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. read more
“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% and Nasdaq futures were down 0.84%, indicating a lower open on Wall Street, after the indices hit record closing highs on Thursday.
The tech gloom hit European stocks (.STOXX), which were down 0.42%.
The MSCI world equities index (.MIWD00000PUS) dipped 0.22% to 745.36, but broader optimism about economic recovery has put it on course for gains of 5% in October, within sight of record highs of 749.16 set last month.
Chinese blue chips (.CSI300) bucked the trend and were up 0.92%, but an index of Chinese real estate firms (.CSI000952) lost 3.5%, and was down nearly 12% 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 (3333.HK) shares lost 3.7% on Friday despite news it had met its second dollar-bond repayment obligation this month. read more
Japan’s Nikkei (.N225) rose 0.25% ahead of Sunday’s lower house election in which the ruling party is expected to lose seats but the coalition government should remain safe. read more
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% in October from 3.4% a month earlier, beating a consensus forecast of 3.7%. That reading is the highest since 2008 and equals the all-time-high for the time series launched in 1997. read more
However, the euro zone economy also grew by a quicker-than-forecast 2.2% 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. read more
The euro fell 0.25% 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. read more
Euro zone bond yields jumped, with Italian 10-year yields rising as high as 1.165% 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.”
There is also growing speculation the Reserve Bank of Australia will struggle to stick to its guidance that rates are unlikely to rise until 2024 after it did not intervene to defend its 2024 bond yield target on Friday.
“This constitutes a de facto abandonment of the yield curve control policy and means that the market can now expect a change in the Australian Central Bank’s monetary policy,” said Vincent Manuel, CIO of Indosuez Wealth Management.
Aussie bonds continued this week’s sharp sell-off, with yields on three-year bonds hitting 1.28% on Friday, their highest since mid-2019.
Benchmark U.S. 10-year yields rose 3.8 basis points to 1.6066% .
The gap between 5-year and 30-year Treasury yields last stood at 79.95 basis points. It narrowed as far as 73.4 basis points overnight, its tightest since March 2020, due to heightened expectations the Federal Reserve will raise rates next year. UST/
Inflationary pressures are related to a unique shock to the economy, U.S. Treasury Secretary Janet Yellen told CNBC in an interview in Rome on Friday.
Oil rose further above $84 a barrel, within sight of a multi-year high hit this week, as expectations OPEC and its allies will keep supply tight countered rising U.S. inventories and the prospect of more Iranian exports.
Brent crude was up 0.3% at $84.57 a barrel. U.S. West Texas Intermediate (WTI) crude futures gained 0.3% to $83.06 a barrel.
Spot gold slipped 0.2% to $1,794 an ounce.
Ether , the world’s second largest cryptocurrency, hit an all-time high of $4,400, before trimming gains.
Additional reporting by Alun John in Hong Kong; Editing by Ana Nicolaci da Costa and Chizu Nomiyama