US stocks fell on Friday, following disappointing updates from tech titans Amazon and Apple, while sentiment in Europe was boosted by a fresh economic stimulus pledge from Chinese authorities.
Wall Street’s benchmark S&P 500 share index lost 0.7 per cent in early trading, as it headed towards a more than 5 per cent loss for the month. The technology-heavy Nasdaq Composite was also down 0.7 per cent, on track to fall more than 9 per cent in April in what would be its worst monthly performance since March 2020.
After the closing bell on Thursday, Apple said supply chain shortages and Chinese factory shutdowns could cost it up to $8bn in the quarter to June. But quarterly group revenues of $97.3bn topped analysts’ forecasts. Amazon meanwhile reported its slowest quarterly revenue growth, citing falling online sales and rising costs. Shares in Amazon were down more than 10 per cent, while Apple moved between small gains and losses.
In contrast, Europe’s regional Stoxx 600 share index added 1 per cent.
“The dominance of the tech sector is a US phenomenon,” said Sonja Laud, chief investment officer at Legal & General Investment Management, pointing out that shares in Apple, Microsoft, Amazon, Tesla, Alphabet, Meta and Netflix made up almost a quarter of the S&P 500.
“The sector composition in Europe is very different,” she added, where markets “can do well on the back of rising commodity and energy prices”.
Brent crude, the oil benchmark, rose 1.9 per cent to $109.66 a barrel.
China’s politburo, the Communist party’s decision-making body, promised on Friday 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 by less than 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.
The euro rose 0.3 per cent against the dollar to around $1.05, but remained close to its weakest level in five years, as traders anticipate the Fed moving faster than the European Central Bank in raising interest rates to curb consumer spending and battle inflation. The pace of consumer price increases has hit a 40-year high in the US but also stands at record levels in Europe.
The dollar index fell 0.4 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 by the same amount at the next two meetings.
The yield on the two-year US Treasury note, which closely tracks monetary policy expectations, rose 0.09 percentage points to 2.74 per cent on Friday after strong consumer spending data. “This really cements the idea that the Fed is going to have to do multiple 50 basis point hikes,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors.
Bond yields rise as their prices fall.