Wall Street is expected to decline as European markets slip due to corporate earnings disappointments, growth worries, and uncertainty over the US election outcomes. Major indices like the Dow Jones, S&P 500, and Nasdaq are projected to open lower. In Europe, indexes such as the CAC 40 and Dax also fell, attributed to weak corporate results and concerns about potential ECB rate cuts. The article also highlights upcoming US economic reports that may influence market responses.
PARIS (Reuters) – Wall Street is projected to decline on Wednesday, with European stock markets also pulling back as corporate earnings disappoint, growth worries loom, and uncertainties surrounding upcoming US elections take their toll on riskier financial assets. New York index futures indicate a bearish opening for Wall Street, with the Dow Jones expected to drop by 0.51%, the S&P 500 by 0.28%, and the Nasdaq by 0.42%.
In Paris, the CAC 40 index fell 0.78% to reach 7,476.4 points around 11:00 GMT. The DAX in Frankfurt decreased by 0.38%, while London’s FTSE saw a decline of 0.4%.
The pan-European FTSEurofirst 300 index is down by 0.36%, the EuroStoxx 50 has dropped 0.58%, and the Stoxx 600 is down 0.38% as well.
As earnings season unfolds across Europe and the US, investor sentiment remains cautious following a slew of disappointing results from major companies.
Notable performances include L’Oréal, Deutsche Bank, and Volvo Cars, which all reported results that fell short of expectations.
Concerns regarding the economic outlook in Europe are also on the rise. Officials from the European Central Bank (ECB) are reportedly contemplating potential rate cuts below the neutral threshold to stimulate economic activity within the Eurozone.
The upcoming PMI indicators set to be released on Thursday will help investors refine their expectations regarding monetary policy, with money markets currently estimating a 20% chance of a 50 basis point cut in December.
In the US, the Federal Reserve’s ‘Beige Book’ release will shed light on current economic conditions, potentially affirming the likelihood of a soft landing for the economy.
Additionally, uncertainties surrounding the US elections are exerting significant pressure, given the contrasting policies proposed by the candidates.
A potential win for Kamala Harris, the Democratic hopeful, is expected to have minimal effects on global markets, as many anticipate continuity in policies similar to those of the current administration under Joe Biden.
Conversely, a victory for Donald Trump may lead to much more pronounced impacts, as he advocates for increased tariffs, tax cuts, and a potential reduction of the Federal Reserve’s autonomy.
‘Markets have begun to factor in the possibility of a Trump victory, which could result in a more inflationary economic approach and a more aggressive trade stance,’ analysts at Natixis observe.
‘Furthermore, we are witnessing a decline in expectations for Fed rate cuts, an uptick in US long-term rates, a strengthening dollar, and a drop in gold prices, while emerging market currencies are facing considerable pressures due to fears of escalating trade tensions.’
VALUES TO WATCH IN US MARKETS
Results from Tesla are anticipated after the market close, with figures from Boeing and Coca-Cola expected prior to market opening.
Texas Instruments announced on Tuesday lower-than-expected fourth-quarter sales forecasts, as its customers are curbing orders.
EUROPEAN MARKET HIGHLIGHTS
L’Oréal’s stock has fallen 3.7%, making it the biggest decliner in the CAC 40, after the French cosmetics firm reported quarterly sales that disappointed investors due to decreased demand in China and slower growth in dermatological products.
Verallia reported lower sales in the third quarter but affirmed its EBITDA target for 2024, resulting in an 8.9% stock increase.
ID Logistics experienced a robust like-for-like sales growth of 20.1% in the last quarter and saw its shares rise by 9.7%.
Deutsche Bank increased its provisions for non-performing loans on Wednesday, reflecting a deteriorating German economic outlook, which pushed the stock down by 1.9% despite growth in earnings.
WPP, the British advertising group, announced on Wednesday its return to organic growth in the third quarter, with an increase of 4.7%. Heineken also reported quarterly sales that surpassed expectations, gaining 2.2%.
In contrast, AkzoNobel, a paint manufacturing company, revealed third-quarter sales and earnings below market forecasts, leading to a 4.6% decline in its stock.
MARKET TRENDS
Short-term yields in the Eurozone are declining as investors anticipate a potential 50 basis point ECB rate cut in December to bolster a slowing economy.
The German ten-year yield has decreased by 1.2 basis points