European stocks drop on weak earnings; Pound Falls: Market wraps

(Bloomberg) — European equities fell on weak luxury-sector earnings as negative sentiment around the semiconductor industry's profit outlook added. A fall in the pound boosted bets on interest rate cuts as UK inflation eased.

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The Stoxx 600 index retreated 0.3% on Tuesday after chip-making giant ASML Holding NV's profit warning extended losses. LVMH and Salvatore Ferragamo SpA led retreats in luxury stocks after weak updates, both down as much as 7%. US equity futures were little changed.

ASML's slide sent ripples across the industry, causing a market-value loss of more than $420 billion for an index of US-traded chipmakers and Asia's biggest stocks. Nvidia Corp sank nearly 5% on Tuesday, after reaching near-record highs earlier this week. Shares were flat in premarket trading on Wednesday.

While the weakness of names like Nvidia and ASML impacted the broader market, Peter Fitzgerald, chief investment officer of macro and multi-asset at Aviva Investors, pointed to continued strength in artificial intelligence demand as well as supportive central bank policy. .

“Our view is that there is considerable underlying strength in the market,” he said. “Especially with central banks providing broad support in an easy way.”

Sterling fell 0.6% to $1.2990, its lowest level since August 20. Wednesday's figures showed that consumer prices rose just 1.7% in September from a year earlier, less than economists had forecast. The FTSE 100 outperformed European indices and UK gilts fell as the data encouraged investors to bet on more aggressive easing from the Bank of England.

Bloomberg's dollar index rose to its strongest level in nearly two months after former President Donald Trump defended his proposal to raise tariffs on foreign imports. Atlanta Fed President Raphael Bostic said he expects the U.S. economy to slow but remain strong this year, adding that the downward path of inflation may see some restraint. Treasury yields lower edge.

In Asia, a Bloomberg gauge of China's property shares rose as much as 8.3% as markets prepared for a joint news conference hosted by government officials, including the housing minister and the central bank, on Thursday.

Chinese stocks have been whipsawed since late September, when a series of stimulus measures by the central bank sparked a burst of optimism that has begun to unravel. Investors are watching to see if the authorities deploy more firepower to boost the economy.

“What really matters for European stocks is what happens in terms of consumer sentiment and consumer spending in China,” said Lillian Chauvin, head of asset allocation at Coutts. “How effective are the measures announced in China in boosting consumer sentiment there, because that's what will really help auto, luxury goods and all the Chinese sensitive sectors in Europe.”

The yen traded at around 149 to the dollar after Bank of Japan board member Seiji Adachi stressed the need to take a gradual approach to raising benchmark interest rates.

This week's highlights:

• Morgan Stanley earnings, Wednesday

• ECB rate decision, Thursday

• US retail sales, jobless claims, industrial production, Thursday

• The Fed's Austin Goolsby speaks Thursday

• China's GDP, Friday

• US housing starts, Friday

• The Fed's Christopher Waller, Neil Kashkari, spoke on Friday

Some of the main rice in the market:

stock

• The Stoxx Europe 600 was down 0.3% as of 9:37 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures were little changed

• Dow Jones Industrial Average futures were little changed

• The MSCI Asia Pacific index fell 0.9%

• The MSCI emerging market index fell 0.5%

currency

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.1% to $1.0879

• The Japanese yen fell 0.1% to 149.38 per dollar

• The offshore yuan rose 0.1% to 7.1277 per dollar

• The British pound fell 0.6% to $1.2999

Cryptocurrency

• Bitcoin rose 1.1% to $67,192.49

• Ether rose 1.6% to $2,612.59

bond

• The yield on 10-year Treasuries fell two basis points to 4.01%

• Germany's 10-year yield fell three basis points to 2.19%

• Britain's 10-year yield fell seven basis points to 4.09%

merchandise

• Brent crude fell 0.1% to $74.15 a barrel

• Spot gold rose 0.6% to $2,677.53 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hu and Sujata Rao.

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