European equities experienced a downturn on Wednesday, largely influenced by disappointing earnings reports from the luxury sector and concerns regarding the semiconductor industry’s profit outlook. The Stoxx 600 index dropped by 0.4%, with significant contributions from major players like ASML Holding NV, which continued its slide following a profit warning issued earlier in the week.
Luxury brands faced notable declines, with LVMH Moët Hennessy Louis Vuitton and Salvatore Ferragamo both experiencing stock drops of nearly 7%. In the U.S., equity futures remained relatively stable amid the ongoing market shifts.
The impact of ASML’s profit warning extended beyond Europe, resulting in a loss of over $420 billion in market value for an index tracking U.S.-listed semiconductor companies and major Asian stocks. Nvidia Corp. saw a nearly 5% drop in its share price following a record close earlier this week.
Despite these setbacks, Peter Fitzgerald, Chief Investment Officer for Macro and Multi-Asset at Aviva Investors, highlighted the robust demand for artificial intelligence technologies and supportive central bank policies as positive factors in the market. “Our view is that there is enough underlying strength in markets,” Fitzgerald remarked. “Particularly with central banks on an easing path providing broad support.”
In currency markets, the British pound fell 0.6% to $1.2990, marking its lowest level since August 20. Recent data revealed a 1.7% rise in UK consumer prices for September, falling short of economists’ expectations and leading to increased speculation about potential interest rate cuts by the Bank of England.
The Bloomberg Dollar Index saw a slight increase, climbing to its highest level in approximately two months. This movement followed comments from former President Donald Trump defending tariff increases on foreign imports. Atlanta Federal Reserve President Raphael Bostic indicated expectations for a slowing U.S. economy while emphasizing the potential for fluctuations in the inflation trajectory. Consequently, Treasury yields edged lower.
Asian markets also reacted to various developments. A Bloomberg gauge of Chinese property shares surged by as much as 8.3% as investors anticipated a joint press conference featuring government officials, including the housing minister and central bank representatives.
Chinese stocks have experienced volatility since late September, fueled by a series of central bank stimulus measures that initially spurred optimism. Investors are now keenly observing whether further measures will be implemented to strengthen the economy.
Lilian Chovin, head of asset allocation at Coutts, noted that consumer sentiment and spending in China are crucial for European stocks. “To what extent the measures announced in China are effective at boosting consumer sentiment over there, because that’s what would really help autos, luxury goods, and all those very Chinese-sensitive sectors in Europe,” she stated.
In foreign exchange, the Japanese yen traded around 149 per dollar, following comments from Bank of Japan Board Member Seiji Adachi regarding the necessity of a gradual approach to increasing the benchmark interest rate.
Key Economic Events This Week:
- Morgan Stanley earnings report – Wednesday
- European Central Bank rate decision – Thursday
- U.S. retail sales, jobless claims, and industrial production data – Thursday
- Federal Reserve’s Austan Goolsbee speaks – Thursday
- China’s GDP report – Friday
- U.S. housing starts – Friday
- Speeches by Fed officials Christopher Waller and Neel Kashkari – Friday
Market Highlights:
- The Stoxx Europe 600 fell 0.3% by 9:37 AM London time.
- S&P 500, Nasdaq 100, and Dow Jones Industrial Average futures were little changed.
- The MSCI Asia Pacific Index declined by 0.9%.
- The MSCI Emerging Markets Index fell by 0.5%.
Currency Movements:
- The Bloomberg Dollar Spot Index rose by 0.1%.
- The euro dipped 0.1% to $1.0879.
- The Japanese yen fell 0.1% to 149.38 per dollar.
- The offshore yuan increased by 0.1% to 7.1277 per dollar.
- The British pound decreased by 0.6% to $1.2999.
Cryptocurrency Updates:
- Bitcoin rose by 1.1% to $67,192.49.
- Ether gained 1.6% to $2,612.59.
Bond Market Trends:
- The yield on 10-year U.S. Treasuries decreased by two basis points to 4.01%.
- Germany’s 10-year yield fell by three basis points to 2.19%.
- The UK’s 10-year yield dropped by seven basis points to 4.09%.
Commodity Prices:
- Brent crude oil decreased by 0.1% to $74.15 a barrel.
- Spot gold increased by 0.6% to $2,677.53 an ounce.
Related topic:
Where Are Commodity Futures Traded?
