US equities were poised to fall on Friday, following weak results from tech titans Apple and Amazon, while sentiment in Europe was boosted by a fresh economic stimulus pledge from Chinese authorities.
The regional Stoxx Europe 600 share index added 0.6 per cent, after gains in Asia, where Hong Kong’s Hang Seng index closed 4 per cent higher.
But futures trading implied Wall Street’s benchmark S&P 500 share index would open 0.9 per cent lower in New York, as it heads towards a more than 5 per cent loss for the month. Contracts tracking the technology-heavy Nasdaq 100 were down 1.1 per cent. The broader Nasdaq Composite is on track to fall more than 9 per cent in April in what would be its worst monthly performance since March 2020.
“The dominance of the tech sector is a US phenomenon,” said Sonja Laud, chief investment officer at Legal & General Investment Management. “While the sector composition in Europe is very different,” she added, where markets “can do well on the back of rising commodity and energy prices”.
The UK’s FTSE 100, which edged 0.2 per cent higher on Friday, has held steady in April as a high exposure to commodities supported the index.
Brent crude, the oil benchmark, added 1.8 per cent to $109.57 a barrel after China’s politburo, the Communist party’s decision-making body, promised to “strengthen macro adjustments” and “achieve full-year economic and social development goals” to safeguard the world’s second-largest economy from widespread coronavirus shutdowns.
“A lot of investors [in Europe] are mainly focused on China, as China really powers the global growth engine and a lot of hopes are hinging on China pulling an ace out of its sleeve,” in terms of economic stimulus, said Gregory Perdon, co-chief investment officer at Arbuthnot Latham.
The Stoxx is on track to fall just over 1 per cent this month, outperforming US indices, which have been dragged sharply lower by expectations of Federal Reserve interest rate rises and stresses in the tech sector, which dominates US equity gauges.
On Thursday evening, Apple warned that supply chain shortages and Chinese factory shutdowns could cost it up to $8bn in the quarter to June. Amazon reported its slowest quarterly revenue growth, citing falling online sales and rising costs, as well as overexpansion during the pandemic when social restrictions provided a large boost to US tech groups.
Shares of Amazon and Apple were down 9.7 per cent and 2.4 per cent respectively in pre-market trading on Friday.
The euro pushed 0.7 per cent higher against the dollar to just under $1.06, but remained more than 4 per cent lower for the month after this week hitting its weakest level in five years, as traders anticipate the Fed moving much faster than the European Central Bank to raise rates to curb inflation.
Traders also looked through data showing that growth in several of the eurozone’s biggest economies including France, Italy and Spain weakened sharply during the first quarter, hinting at stagflation in a region grappling with soaring energy and food prices.
Elsewhere, the dollar index fell 0.6 per cent after the gauge, which measures the currency against six others, hit a 20-year high on Thursday. Markets are tipping the Fed to raise its main borrowing rate by half a percentage point at its May meeting, and then by the same amount at the next two meetings.
The yield on the 10-year US Treasury note, a benchmark for debt costs worldwide, was broadly steady on Friday, but remained around its highest point since the end of 2018.