(Bloomberg) — Stocks tumbled around the world, with chip makers leading losses, as investors pulled back from the artificial intelligence frenzy and disappointing earnings.
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The Stoxx 600 (^STOXX) fell more than 1%, extending Wall Street’s big tech rout. Nestle SA (NESNZ.XC), Stellantis NV (STLAP.PA) and Kering SA (KER.PA) dropped in earnings that missed estimates. French stocks are on the verge of a 10% correction. U.S. stock indexes were little changed after the S&P 500 slumped 2.3% on Wednesday.
“There seems to be a reassessment of the cost and benefit calculus for the artificial intelligence ecosystem,” said Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd. . These worries may prove temporary in the end, but a collective reassessment by investors is reasonable after the angry rally.
With earnings season in full swing, investors are watching U.S. data on gross domestic product and initial jobless claims due Thursday for evidence of the economy’s health. Former New York Fed President William Dudley called for lower borrowing costs – better at next week’s meeting. The move could be worrisome because it would show officials are rushing to avoid a recession, some analysts said.
The yield on two-year Treasuries fell seven basis points to 4.35% as traders brought up expectations of rate cuts. Meanwhile, if the rally is more than 1% amid many expectations that the interest rate gap between Japan and the US is finally set to narrow.
Company Highlights:
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Nestle SA lowered its sales outlook for this year as consumers resisted rising prices for food, water and pet care products.
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Stellantis shares fell after the carmaker’s earnings plunged in the first half of 2024. Morgan Stanley said free cash flow was a key disappointment, while noting the stock’s weak performance this year.
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Kering shares tumbled 10% after warning profits were set to plunge in the second half of the year, highlighting the challenges the French luxury goods maker faces as it transforms flagship Gucci at the center of the sector.
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Universal Music Group fell as much as 28%, the most on record, after second-quarter results, which Citi said “damaged” what it saw as its defensive growth credentials.
This year’s rally in tech stocks has hit a wall and disappointing reports from Tesla Inc. and Alphabet Inc. drove rotting in the previous session. Traders have pivoted from megacaps to the lagging market segment, driven by bets on Fed rate cuts and AI concerns still to be paid.
“Tech’s problem is not only that the earnings are less than perfect, but the group is still caught up in the rough trade rotation that kicked off with the June CPI,” said Vital Knowledge Adam Crisafulli. “Many assumed the anti-tech rotation would be ephemeral and the fact that it proved durable was adding anxiety to the group and causing additional selling pressure.”
While the drop may argue for a buyout, the earnings season is just beginning. Apple Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. all due to report results next week.
This week’s highlights:
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Business climate IFO Germany, Thursday
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US GDP, initial jobless claims, durable goods, Thursday
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US personal income, PCE, consumer sentiment, there
Some of the main movements in the market:
Savings
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The Stoxx Europe 600 fell 1.1% at 8:06 am London time
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S&P 500 futures were unchanged
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Nasdaq 100 futures rose 0.1%
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Futures on the Dow Jones Industrial Average rose 0.2%
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MSCI Asia Pacific index down 1.7%
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MSCI Emerging Markets index down 0.8%
currency
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0833
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The Japanese yen rose 0.8% to 152.71 per dollar
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The offshore yuan rose 0.3% to 7.2460 per dollar
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The British pound fell 0.2% to $1.2884
Cryptocurrencies
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Bitcoin fell 2.6% to $64,325.09
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Ether fell 6% to $3,172.05
Bond
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The yield on 10-year Treasuries declined three basis points to 4.25%
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German 10-year yield unchanged at just 2.44%
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UK 10-year yield unchanged at 4.16%
Commodity
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Brent crude fell 0.7% to $81.12 a barrel
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Spot gold fell 1.1% to $2,370.79 an ounce
This story was produced with the help of Bloomberg Automation.
—With assistance from Winnie Hsu and Richard Henderson.
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