Equities Face the Reality of Profits, Central Banks Focus of Attention

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A man looks at a stock quote chart outside a brokerage house in Tokyo, Japan on April 18, 2016. REUTERS / Toru Hanai

  • Global stock prices hit record highs as supply issues hit earnings
  • The yield curve flattens sharply as short rates rise after the BoC move
  • BOJ and ECB stick to accommodative monetary policy

TOKYO, Oct.28 (Reuters) – Global stocks retreated from record highs as a sharp reminder of supply chain problems in corporate earnings reports stalled their recovery, while investors also investigated whether central banks might consider tightening monetary policy sooner than expected.

MSCI’s global equity indicator ACWI plunged 0.05% <.miwd00000pus> At the start of Thursday trading, the Japanese Nikkei (.N225) leading the loss with a fall of 1.1%.

Mainland China stocks (.CSI300) slipped 0.2% while the MSCI’s largest Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.1%.

On Wall Street overnight, the S&P 500 (.SPX) lost 0.51% from its all-time high on Tuesday, although the Nasdaq (.IXIC) was little changed, thanks to strong earnings from Microsoft (MSFT .O) and Google’s parent company, Alphabet (GOOGL.O).

Yet earnings reports also show top U.S. manufacturers including General Motors (GM.N), General Electric (GE.N), 3M (MMM.N) and Boeing (BN) are facing logistical challenges. and at higher costs due to supply bottlenecks that are expected to persist over the next year. Read more

GM lost 5.4% after the publication of its results on Wednesday. Read more

In Asia, Japanese robot maker Fanuc (6954.T) fell 8.5% while IT conglomerate Fujitsu (6702.T) lost 9.8% as revenue showed a bigger impact than expected of the shortage of chips.

“The working assumption in the market was that the impact of a chip shortage will wear off by the end of the year. But if that remains a problem next year, investors will surely be less confident. as for the outlook, “said Masayuki Murata, Managing Director. balanced portfolio investment at Sumitomo Life Insurance.

With global supply disruption fueling concerns about inflation, investors are watching closely whether the world’s central banks will seek to reduce their generous stimulus packages more quickly in the event of a pandemic.

The Bank of Canada ended its quantitative easing earlier than expected and signaled that it could raise interest rates sooner than expected, as early as April 2022.

The BoC’s action has stoked expectations that the U.S. Federal Reserve may also be heading for rate hikes faster, with federal funds term rates predicting two rate hikes by the end of 2022.

The Fed is almost unanimously expected to announce the reduction in its bond purchases at its policy meeting next week.

The yield on two-year US Treasuries reached 0.528% and was last at 0.501%. At the start of October, it was around 0.26%.

In contrast, longer-term yields have fallen in part, as tighter monetary policy is likely to keep inflation under control over time.

US 10-year bond yields fell to 1.545%, from a five-month peak of 1.705% reached a week ago.

Falling UK gilt yields also helped push global bond yields down after the UK government cut its borrowing forecast more than expected. Read more

The 10-year Gilt yield fell 12.8 basis points on Wednesday, its biggest drop since March 2020, to 0.982%.

In foreign exchange markets, the Canadian dollar held steady at C $ 1.2362 per dollar following the BoC’s surprise.

Other important currencies were on hold ahead of the Bank of Japan and European Central Bank’s policy announcements later today, although no major changes are expected.

The yen rose to 113.73 per dollar, above its four-year low of 114.695 reached last week as the euro changed hands to $ 1.1600.

Oil prices fell after U.S. crude oil inventories rose more than expected, even as fuel inventories fell and tanks at the nation’s largest storage facility emptied again.

The larger-than-expected rise in US crude stocks prompted some investors to shed long positions after strong gains in recent weeks took Brent and US crude benchmarks to multi-year highs.

Brent fell 1.8% to $ 83.07 a barrel, from Monday’s seven-year high of $ 86.70, while U.S. crude hit $ 81.25 a barrel, down 1 , 7% and from Monday’s high of $ 85.41, a seven-year high.

Editing by Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.


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