Yahoo Finance Stocks fall amid rate rise fears and disappointing earnings
A look at how the major markets are performing on Wednesday
The FTSE 100 (^FTSE) and European markets fell on Wednesday as investors digested UK inflation data for March, while US stocks also opened in the red.
The Dow Jones (^DJI) fell 0.40% to 33,839.81 points, while the S&P 500 (^GSPC) dropped 0.41% to 4,135.56 points. The tech-heavy NASDAQ (^IXIC) was also down – by 0.64% to 12,077.63.
Earnings continue to take centre stage today with Tesla (TSLA) and Morgan Stanley (MS) results.
FTSE 100 and European markets
The FTSE 100 (^FTSE) and European markets fell after a raft of new economic data.
In the UK, the Consumer Price Index dropped to 10.1% last month, down from 10.4% in February, according to the Office for National Statistics.
Euro-area inflation figures also impacted the markets.
The FTSE 100 (^FTSE) fell 0.06% to 7,904.96. The CAC 40 (^FCHI) in Paris declined 0.03% to 7,531.20 points – and in Germany, the DAX (^GDAXI) dropped 0.20% to 15,851.53.
Asia markets
In Asia, the major markets also all closed down, despite China’s economy growing more than analysts had expected this week.
Tokyo’s Nikkei 225 (^N225) fell 0.18% to 28,606.76 points, while the Hang Seng (^HSI) in Hong Kong declined 1.12% to 20,418.74. In mainland China, the Shanghai Composite (000001.SS) also closed in the red – it dropped 0.64% to 3,371.53 points.
Pound
The pound (GBPUSD=X) gained against the US dollar by 0.12% to 1.24 following the release of the latest UK inflation data. Against the euro, the sterling (GBPEUR=X) also rose by 0.30% to 1.13.
Oil prices
Crude prices fell on Wednesday despite better-than-expected growth figures from China on Tuesday.
US crude oil, or West Texas Intermediate (CL=F), declined 0.52% to $80.44 a barrel, while Brent crude (BZ=F) also fell – by 0.50% to $84.35 a barrel.
Economic data
UK inflation fell to 10.1% last month – a return to a decline after a shock increase to 10.4% in February due to soaring food prices.
City economists had forecast a cooling in the UK’s March inflation rate but for a reading of 9.8%.
Analysts said that while price pressures eased for motor fuels, clothing, restaurants, and hotels, the upward effects remain from food and drinks, recreation and culture.
The Bank of England is watching these figures very closely as this is the last significant data release before their next meeting in early May.
The general consensus at the moment is that the Bank of England will need to hike by 25 basis points, or a quarter of one percentage point, at its May meeting, according to Giles Coghlan, chief market analyst for HYCM.
He said the latest data is a sign that inflation is not yet back on track. “The question investors will be asking now is, where does the Bank of England go from here?"
Watch: How does inflation affect interest rates?
Russ Mould, investment director at AJ Bell, also said inflation data strengthens the argument for BoE rate rise.
Deutsche Bank said in its research notes that they expect a 50bps hike in May meeting. “We now expect the MPC to push through two more hikes, taking Bank Rate to the very top end of our terminal rate projection at 4.75% in June. We now see risks to our terminal rate forecast skewed to the upside,” said senior economist Sanjay Raja.
Read more: UK inflation eases but remains above 10% as food prices soar
Meanwhile, eurozone inflation eased to 6.9% from 8.5% after a rapid fall in energy costs. Natural gas prices decline continues after their surge a year ago as Russia launched invasion of Ukraine.
Company results
Morgan Stanley results
Morgan Stanley (MS) said its first-quarter earnings fell 19% to $2.98bn (£2.39bn), or $1.70 per share, as a result of investment banking and trading declines, while revenue slipped 2% to $14.53bn. The bank receives most of its revenue from wealth and investment management – which has grown under its chief executive, James Gorman.
“The investments we have made in our wealth management business continue to bear fruit as we added a robust $110bn in net new assets this quarter,” Gorman said.
“Equity and fixed Income revenues were strong, although investment banking activity continued to be constrained," he added.
Tesla earnings
Tesla (TSLA) stock will also be on the radar of investors – with the company releasing results later today. Analysts say Tesla's lowering prices of cars will have an impact on earnings.
Naeem Aslam, chief investment officer at Zaye Capital Markets, commented on Tesla: “Lowering prices implies lowering profit margins, and the issue now is: how do we know which will support its future earnings.”
Other stocks to watch
ASML Holding (ASML) reported better than expected first-quarter earnings on Wednesday despite signs of weakness in chip markets. It posted net profit for the quarter ended 31st March of €1.96bn, while its revenue was up 91% at €6.74bn, nearly three times higher than a year ago.
The outlook for ASML also remains strong, despite belt-tightening among its clients. "Overall demand still exceeds our capacity for this year and we currently have an (order) backlog of over €38.9 billion," Peter Wennink, chief executive of ASML, said in a statement.
Shares in Just Eat Takeaway.com (TKWY.AS) were trading down 2.07% in Amsterdam trading after it reported a 14% fall in customer orders to 227.8 million in the first quarter.
Analysts surveyed by Bloomberg had expected the food-delivery company orders to be in the region of 231.1 million.
Read more: Trending tickers: ASML | JustEatTakeaway.com | Rio Tinto | Antofagasta
In a trading update, the company raised its 2023 guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to about €275m, from about €225m previously.
Investors will also be keeping an eye on the share price of Chilean copper miner Antofagasta (ANTO.L) after it reported a fall in production for copper, gold and molybdenum for the first quarter of the year.
"Copper production in 1Q 2023 at 145,900 metric tons was in line with guidance, 5.1% higher than in the same quarter in 2022 and 25% lower than in 4Q 2022," the company said in a statement.
However, it said production is expected to increase through the rest of the year.
Netflix earnings
Netflix (NFLX) shares fell 3.39% on Wednesday – failing to recover from its mixed first-quarter results announced on Tuesday.
The streaming giant reported earnings per share at $2.88 (£2.31), beating an estimated $2.86, while its revenue was $8.16bn, shy of the $8.18bn estimated by Bloomberg consensus estimates.
The net subscriber was 1.75 million, more than an expectation of 1.38 million. Netflix said it delayed the password-sharing crackdown.
Watch: Netflix – Key takeaways from the streamer's earnings call
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