European shares retreat as earnings disappoint: Markets wrap

(Bloomberg) — Europe's stock benchmark retreated from a record peak amid disappointing earnings from some of the region's biggest companies.

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The Stoxx Europe 600 gauge fell 0.3%, still four points off its January 2022 peak. Banks led the way, falling more than 6% after HSBC Holdings plc reported an 80% drop in fourth-quarter profit.

Weaker earnings from the world's biggest iron ore miner Glencore Plc and Rio Tinto Plc weighed on the basic resources sub-index, which fell to a four-month low. On the positive side, Carrefour SA gained after the French grocer announced a share buyback despite disappointing quarterly sales.

Positive economic surprises buoyed European stocks, even as traders bet on interest rate cuts by the European Central Bank. According to Bloomberg Intelligence, volatility measures are at historic lows, suggesting some complacency is still in the market to the upside.

“European stocks could consolidate recent gains as investor sentiment warms,” ​​BI strategists Laurent Douillet and Tim Craighead wrote in a report. “Rising government bond yields have so far not curbed enthusiasm, as highly leveraged companies are doing slightly better, and remain a key risk for equities in 2024.”

U.S. stock futures fell ahead of the release of minutes from the Federal Reserve's last policy meeting and much-anticipated earnings from Nvidia Corp. late Wednesday. The company at the center of the AI ​​revolution boasts the best performance in the S&P 500 this year, more than tripling by 2023.

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“I feel like today's earnings are a barometer of where we are in the global cycle,” said Justin Onukwuzi, chief investment officer at St. James Place. “Focusing on the stock market has reached levels where a company's earnings can have a large macro effect. This goes beyond being a portfolio construction issue; This is a macro challenge from which you cannot escape.

10-year Treasury yields and the dollar were flat.

Elsewhere, Chinese stocks rose after policymakers took additional steps to revive investor confidence despite broader weakness in Asia following a tech-led retreat on Wall Street.

Hong Kong-listed Chinese companies rose as much as 4%, while the CSI 300 index of mainland stocks rose 1.4%. Property developers profited after banks stepped up financial support for the struggling sector. A new crackdown on trading by quant funds also eased concerns about short selling. This is in contrast to losses in other Asian markets.

In the commodity space, aluminum rose on speculation that a new wave of US sanctions against Russia could target the metal and disrupt supplies. Iron ore clawed back some of its losses after Chinese steel mills reported an increase in output. Both oil and gold rose.

Highlights of this week:

• Eurozone consumer confidence, Wednesday

• Nvidia earnings, Wednesday

• The Federal Reserve releases the minutes of its January meeting on Wednesday

• Atlanta Fed President Raphael Bostick speaks on Wednesday

• Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, CPI, Thursday

• US Initial Jobless Claims, US Existing Home Sales, Thursday

• The ECB publishes the account of the January meeting on Thursday

• Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari speak Thursday

• China property prices, Friday

• Germany IFO Business Environment, GDP, Friday

• The ECB releases 1- and 3-year inflation expectations on Friday

Some key movements in the markets:

Shares

• The Stoxx Europe 600 was down 0.3% as of 9:19 a.m. London time.

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.4%

• Futures for the Dow Jones industrial average fell 0.2%

• The MSCI Asia Pacific Index was little changed

• The MSCI emerging market index rose 0.1%

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.0794

• The Japanese yen was little changed at 150.08 per dollar

• The offshore yuan was little changed at 7.1971 to the dollar

• The British pound fell 0.1% to $1.2609

Cryptocurrencies

• Bitcoin fell 1.1% to $51,447.12

• Ether fell 2.2% to $2,923.64

Bonds

• The yield on 10-year Treasuries was little changed at 4.27%.

• Germany's 10-year yield rose two basis points to 2.39%

• Britain's 10-year yield rose two basis points to 4.06%

materials

• Brent crude was down 0.5% at $81.90 a barrel

• Spot gold rose 0.1% to $2,027.06 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Rob Vertank and Sujata Rao.

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