NEW YORK, Feb 8 — Stock markets stumbled today as Wall Street opened lower, Europe gave up gains built on bumper BP profits, while the euro was pegged back as the European Central Bank tried to cool interest rate hike expectations.
Wall Street saw a groggy restart on disappointing Pfizer earnings, another slump in Facebook owner Meta’s shares and the collapse of Nvidia’s mega deal to buy the firm that designs chips for the likes of Apple.
Europe also turned red again although oil and mining shares were still clinging to positive territory after FTSE-listed BP reported a whopping US$12.8 billion annual profit thanks to soaring gas and oil prices.
It was BP’s highest profit in eight years, working out at staggering US$24,353 a minute — more than someone on minimum wages in major economies would earn in a year.
It had also helped traders brush off Washington slapping warnings on another 33 Chinese firms and the sight of the 10-year US Treasury yield — the most influential driver of global borrowing costs — hitting a new 2-year high.
Currency and bond market traders are currently laser-focused on which central banks will hike their interest rates the fastest and furthest this year following the rapid rise in global inflation.
“Central banks globally have all engaged in a hawkish pivot,” said BlueBay Asset Management’s David Riley. “As their tolerance for higher inflation persistently is less than previously signalled we are shifting to a regime where there will be more macro volatility.”
Comments from ECB President Lagarde on Monday that there was currently no need for major monetary policy tightening weakened the euro for a second consecutive day.
It had initially nudged down the bond yields — a proxy for borrowing costs — for high-debt countries such as Italy, Greece and Spain, although that reversed as Spain’s ECB council member, Pablo Hernandez de Cos, spoke on Tuesday about gradual tightening.
Italian government bonds duly whipsawed, with the 10-year yield first falling to 1.78 per cent before rearing right back up to 1.85 per cent.
Choppy China
US stocks made a subdued open on Wall Street after the earnings disappointments and a fresh 1.2 per cent drop in Facebook owner Meta’s shares after billionaire investor Peter Thiel decided to step down from the company’s board. Focus is also on inflation data this week that could offer more clues on the Fed’s first post-COVID rate hike.
Pfizer fell 3.7 per cent in early trading as the drugmaker’s forecasts for its Covid-19 vaccine and antiviral pills fell short of Wall Street estimates, while Coty jumped 3 per cent after raising its forecasts.
Asia’s session had been volatile overnight too. MSCI’s broadest index of Asia-Pacific shares ended flat overall but blue chip Chinese stocks dropped to a 19-month low after big tech firms’ heavy losses and US export warnings on 33 new Chinese firms.
The prospect of global rates rising had pushed Japanese government bond yields up too, while those on benchmark 10-year US Treasuries briefly touched 1.96 per cent.
Back in the currency market Russia’s rouble hit a four-week high after marathon talks between President Vladimir Putin and his French counterpart Emmanuel Macron have kept up hopes that war in Ukraine will be avoided.
It helped oil come off Monday’s seven-year high of US$94 on Monday.
It was trading lower at US$92 also ahead of the resumption of indirect talks in Vienna later between the United States and Iran, which may revive a nuclear agreement that could eventually allow more oil exports from the OPEC producer.
A deal could allow over 1 million barrels per day of Iranian oil, equal to over 1 per cent of global supply, back onto the market, though that was still a distant possibility.
Brent crude was down US$1.30, or 1.4 per cent, at US$91.37 a barrel. US West Texas Intermediate crude fell US$1.55, or 1.4 per cent, at US$89.95.
Eight rounds of indirect talks between Tehran and Washington since April have yet to result in an agreement on resuming the 2015 nuclear deal. Differences remain about the speed and scope of lifting sanctions on Tehran. — Reuters
