US and European stocks fall as Big Tech sales figures disappoint

Wall Street stocks drifted lower on Friday, echoing losses in Europe, after disappointing results from Apple and Amazon revived questions about labour shortages, supply squeezes and, in turn, persistently high inflation.

The blue-chip S&P 500 index slipped 0.3 per cent in late-morning trading, while the tech-heavy Nasdaq Composite was flat after dropping 0.5 per cent at the open.

Those moves came after Apple and Amazon missed analysts’ expectations on Thursday. In an earnings report delivered after the closing bell, Apple posted revenues of $83.4bn for the fiscal quarter ending in September, up 29 per cent but slightly below consensus estimates as supply constraints hampered growth. The iPhone maker’s net profits beat forecasts.

Meanwhile, Amazon warned that labour challenges and rising costs would damp earnings for the rest of the year, as it delivered third-quarter sales of $111bn — below the $112bn projected by analysts.

US stocks had in the previous session closed at record highs, helped by a series of strong earnings updates from large companies including machinery group Caterpillar, which is perceived as an economic bellwether, along with positive numbers earlier in the week from Microsoft and Alphabet. Microsoft on Friday surpassed its Silicon Valley rivals to become the largest company in the world.

But fresh figures showed that US consumer spending softened in September, with growth of 0.6 per cent marking a slowdown from 1 per cent in August. Meanwhile, the core personal consumption expenditure (PCE) price index — a measure of inflation — rose 3.6 per cent in September year on year, broadly in line with projections.

The Stoxx Europe 600 share index edged down 0.1 per cent in afternoon dealings, as fresh data showed that annual inflation for the eurozone rose to 4.1 per cent in October. This marked an increase from 3.4 per cent in September and topped consensus forecasts of 3.7 per cent, according to a Refinitiv poll.

Those inflation data were released alongside figures showing that the eurozone economy grew 2.2 per cent in the three months to September, compared with the previous quarter — higher than estimates of 2 per cent.

Government bond markets were choppy after significant volatility on Thursday afternoon in the wake of the European Central Bank’s meeting.

Germany’s two-year Bund yield rose 0.05 percentage points to minus 0.58 per cent on Friday, as investors bet the ECB would lift rates next year. Ten-year Italian bond yields rose 0.16 percentage points to 1.15 per cent, bringing the increase over the past two days to 0.25 percentage points. This marks the heaviest sell-off in the country’s benchmark bond since the nation’s Covid-19 crisis in spring 2020.

The moves came after ECB chief Christine Lagarde attempted to push back on market pricing for a rate rise from historic lows next year.

Investors have also been focused on other global central banks that are expected to move sooner to reduce their stimulus measures. The Reserve Bank of Australia chose not to defend its bond-yield target, which is central to its quantitative easing programme. This decision pushed the yield on Australia’s April 2024 government bond to more than 0.7 per cent — well beyond the bank’s target of about 0.1 per cent.

Interest rate decision announcements are due next Tuesday, Wednesday and Thursday respectively from the RBA, US Federal Reserve and Bank of England.

“The part of the yield curve that is really pricing rate hikes is the front end up to five years,” said Alessio de Longis, head of global tactical asset allocation at Invesco. “The market is basically saying the central banks have to raise interest rates.”

Ultimately, the way the yield curve was behaving showed that “the market is pricing a return to the low growth, low inflation world that we have had post [global financial crisis]”, added de Longis.

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