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Weak earnings and trade tensions weigh on global stocks

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Weak earnings and trade tensions weigh on global stocks on Thursday with major indexes around the world sinking deep into the red.

Wall Street stocks closed at the day’s lows on Wednesday after The Wall Street Journal reported that trade negotiations between the US and China had faltered over restrictions on Chinese telecommunications giant Huawei, citing sources familiar with the talks.

This came after President Donald Trump on Tuesday made skeptical comments about the possibility of an imminent resolution to the ongoing trade war between the world’s two largest economies.

Asian markets recap

The main stock indexes in the Asia-Pacific region ended Thursday trading session with declines after the Wall Street Journal reported that talks between Washington and Beijing are in a “dead end” because of the US sanctions against Chinese telecoms company Huawei.

In China, the mainland index Shanghai Composite fell by 30.52 points, or 1.04%, to 2,901.18 points. Hong Kong’s benchmark Hang Seng fell by 206.84 points, or 0.72%, to 28,386.33 points. Shares of technology giant Tencent fell by 1.27%.

In Japan, the blue-chip index on Tokyo Stock Exchange, Nikkei 225, wiped out 422.94 points, or 1.97%, to 21,046.24 points. The country’s exports declined by 6.7% YoY in June, failing to meet economists’ expectations for a decline of 5.6%. The shares of SoftBank Group and the industrial giant Fanuc declined. The best performers of the session on the Nikkei 225 were Chiyoda Corp (+1.32%), Dainippon Screen Mfg (+0.79%) and Sumitomo Realty & Development Co (+0.03%), while on the flipside were Idemitsu Kosan Co (-5.05%), Konica Minolta (-4.96%) and Toyo Seikan Group Holdings (-4.91%).

South Korean index Kospi declined by 0.31% to 2,066.55 points. Shares of Celltrion fell by about 2%. The Central bank of Korea said it cut its benchmark interest rate by 25 basis points to 1.5% after the regulator earlier this month lowered its target for economic growth in the country against the backdrop of continuing tensions with Japan and the export ban on certain Japanese goods for South Korea.

KOSPI

Taiwan’s largest semiconductor and chip maker, Taiwan Semiconductor Manufacturing Company, which is also a major supplier to Apple, reported a 7.6% decline in net profit for the second quarter. Company representatives say the April-June that profit fell to 66.765 billion TWD (2.1 billion USD). Nevertheless, the company’s shares rose by 0.79%.

Australian index S&P ASX 200 declined by 0.36% to 6,649.10 points. The stocks of Lendlease rose by 4.75% after announcing that it has signed a contract with the technology giant Google worth 15 billion USD. Earlier today, Australian labor market data were also published, showing that the unemployment rate in June remained at 5.2%. Only 500 new jobs were created in the past month, which is far from the expected 10,000 new positions from economists.

European markets mid-session recap

Technology stocks pushed European shares to three-week lows on Thursday after software firm SAP reported poor results, the latest company to warn about damage from protracted trade tensions as gloom about earnings spreads across global equities. The pan-European Stoxx 600 inched lower by 0.18% to 386.97 points.

German index DAX 30 is down by 80.96 points, or 0.66%, 12,260.07 points at 10:30 GMT. The stocks of SAP dropped by more than 6% after telling investors they will have to wait till next year for a major improvement in margins as the business software group reported a 21% decline in quarterly operating profit. Carmakers are into the red with Daimler and Volkswagen, edging lower by 0.54% and 0.29%, while financial companies are mixed with Deutsche Bank rising by 0.3% and Commerzbank falling by 2.3%.

dax

French index CAC 40 compensated earlier loss and is trading lower by 0.03% to 5,570.05 points. Earlier, the benchmark sank deep into the red and reached daily low of 5,534.30 points. The shares of Renault are down by 0.5%, while Peugeot dropped by 0.8%.

British index FTSE 100 is down by 0.3% to 7,512.56 points at mid-session trading, following other major stock markets. Slug and Lettuce owner Stonegate Pub Company agreed to buy Ei Group for 285 pence per share, which is 38% premium to Wednesday’s close, which sent the mid-cap pub chain’s stock to its highest in more than a decade. The stock surged nearly 39% and helped fellow mid-cap pub operators Mitchells & Butlers, Greene King and Marston’s rise between 1.1% and 2.9%. AIM-listed ASOS tanked 11%, as it blamed operational issues for its third profit warning in eight months. Luxury brand Burberry, which is on course for its best week in more than a decade after posting robust sales growth on Tuesday, gave up 1.5%.

Wall Street pre-session recap

Wall Street stock index futures were nearly flat Thursday morning as earnings season gathers momentum.

Around 7 a.m. ET, Dow futures indicated an implied positive open of less than 5 points, while the S&P 500 and Nasdaq also pointed to lower opens.

As earnings season kicks into full gear, Railroad giant CSX posted weaker-than-forecast quarterly results on Wednesday, sending its stock plummeting, while Bank of America reported better-than-expected earnings but warned that lower rates would hit its net interest income growth.

Both United Airlines and Cintas also beat expectations, indicating that the bleak outlook offered at the beginning of earnings season might have been overly pessimistic. However, only around 7% of S&P 500 companies have reported second-quarter earnings thus far, according to FactSet data.