Disappointing earnings weigh on market sentiment - 27.10.2016

US stocks slide as Apple reports revenue miss

US stocks slid on Wednesday led by Apple which dropped 2.3%, its biggest daily loss since September 9 on revenue miss. However the Dow Jones industrial average closed higher helped by 4.7% jump in Boeing shares on better-than-expected quarterly report. The dollar ended slightly lower.

The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six major currencies, slipped 0.1% to 98.613. The S&P 500 ended 0.2% lower settling at 2139.43 led by the real estate, health care and telecom stocks. The Dow Jones industrial average gained 0.2% to 18199.33 as the slide in Apple limited the gains due to rally in Boeing shares on higher than expected earnings and improved outlook. The Nasdaq ended 0.6% lower at 5250.27. Economic data did little to boost market sentiment: US trade deficit dropped in September and new home sales rose, but previous three months’ readings were revised downward, pointing to a weak momentum in housing market. Business activity rose in October with both preliminary Services and Composite PMIs rising more than expected while advance wholesale inventories rose 0.2% in September instead of expected 0.1% build. Falling trade deficit and higher spending on inventory point to higher GDP than previously estimated. This supports the case for a Fed rate hike soon as stated by the central bank in case of improving incoming data. Currently the market is pricing in a roughly 74% chance of a rate hike in December and a 9% probability for November, according to CME Group’s FedWatch tool. The third quarter preliminary GDP reading is due on Friday. Today at 14:30 CET Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is neutral for dollar. At the same time September preliminary durable goods orders will be released, the tentative outlook is neutral. At 16:00 CET September Pending Home Sales will be published, the tentative outlook is positive. At 16:30 CET Natural Gas Storage Change will be released by the Energy Information Administration.

European stocks fall as earnings disappoint

European stocks retreated on Wednesday following disappointing corporate reports with materials stocks falling as oil extended losses. Both the euro and Pound edged higher against the dollar.

The Stoxx Europe 600 closed 0.4% lower, recording the third loss in a row. Among oil producers Tullow Oil lost 1.4% and miner Antofagasta lost 3.2% after reporting it expects this year’s copper output to be close to the lower end of its forecast of 710,000-740,000 tons. Germany’s DAX 30 finished 0.4% lower at 10709.68. France’s CAC 40 slipped 0.1% with UK’s FTSE 100 dropping 0.9% to 6958.09. Today Q3 GDP came in at 0.5% quarter-over-quarter in UK, better than the expected 0.3% growth after 0.7% rise in the previous quarter.

China's industrial profits slow down

Asian stocks are retreating today with weak Chinese data not helping buoy the market sentiment undermined by disappointing Wall Street reports overnight. The Shanghai Composite Index is down 0.1% with Hong Kong’s Hang Seng index 1.0% lower after data showing profits in China's industrial companies grew 7.7% in September, slowing sharply from the previous month's 19.5% pace. Nikkei closed 0.3% lower at 17336.42 today despite weaker yen against the dollar. Investors are concerned about earnings prospects after Canon Inc issued a profit warning due to the yen's recent strength: Canon’s shares closed 3% lower. Australia’s All Ordinaries Index lost 1.1% as the Australian dollar fell.

HSI

Venezuela stability concerns support oil

Oil futures prices are edging higher today supported by Venezuela stability concerns, a major oil producer. Prices fell on Wednesday despite a surprise 600 thousand barrels drop in domestic crude supplies as reported by the Energy Information Administration. Traders are skeptical major oil producers will succeed in agreeing to output cuts at OPEC meeting in Vienna November 30. Iraq has announced plans to boost output from current 4.43 million barrels per day to generate revenue to fight Islamic militants. The country has requested international companies submit bids to help it develop 12 "small and medium-sized" oil fields. December Brent crude fell 1.6% to $49.98 a barrel on London’s ICE Futures exchange on Wednesday.