Tesla and Alphabet Earnings Miss Keep Investors Skittish

LVMH reported a 14% decline in second-quarter sales in Asia, excluding Japan, while disappointing results from Tesla and Alphabet add to investor concerns. European banks, including Santander, BNP Paribas, Deutsche Bank, and UniCredit, are set to release their earnings, with markets focusing on the impact of higher interest rates and political issues. Currency traders are closely watching the yen, which has surged 3.7% against the US dollar this month due to suspected intervention and speculator activity.

Equities

The FTSE 100 fell by 0.4% on Tuesday, impacted by declines in commodity-linked stocks, following drops in oil and copper prices. Industrial metal miners, including Rio Tinto and Glencore, saw declines of 1.5% and 2.2% respectively, driven by concerns over weak Chinese demand for copper. Energy shares and precious metal miners also fell, with energy stocks down by 1.6%.

Despite the overall downturn, some companies posted positive results. Compass Group rose by 4.5% after raising its profit and revenue forecasts for the second time this year. Rolls-Royce increased by 3.8% as it developed a smaller version of its Ultrafan engine demonstrator. Beazley gained 1.8% after stating it had no plans to alter its guidance following a global IT glitch.

In the US, Wall Street’s main indexes ended slightly lower on Tuesday, with the S&P 500 down 0.16%, the Nasdaq Composite falling 0.06%, and the Dow Jones Industrial Average dropping 0.14%. Tesla dropped 2% before releasing its earnings, despite later reporting a surprise rise in revenue due to higher vehicle deliveries. Alphabet's shares rose 0.1% before surpassing revenue estimates driven by digital advertising sales and cloud computing demand.

United Parcel Service slumped 12.1% to its lowest close since July 2020 after missing earnings estimates, citing subdued package delivery demand and higher labour costs. General Motors dropped 6.4% despite beating second-quarter expectations and raising its annual profit forecast. Comcast fell 2.6% after missing revenue estimates, and NXP Semiconductors declined by 7.6% following a forecast of third-quarter revenue below estimates.

Spotify saw a significant rise of 12% after reporting a record quarterly profit that slightly exceeded expectations. Coca-Cola rose by 0.3% after increasing its annual sales and profit forecasts. The small-cap Russell 2000 rose by 1% on the day, reflecting a rotation into smaller-cap stocks.

Forex & Commodities

Commodity currencies fell to multi-week lows on Wednesday due to weakening raw material prices, with the most significant selling against the yen. The Australian dollar dropped 0.5% to $0.6686 and over 1% to 101.79 yen, down nearly 7% in two weeks. The New Zealand dollar decreased by 0.6% to a near three-month low of $0.5914, and the Canadian dollar hit a three-month trough of C$1.38 per dollar.

The yen surged to a two-month high as short sellers exited ahead of a Bank of Japan meeting, with the dollar/yen falling nearly 1% on Tuesday and another 0.6% on Wednesday to 155.36 per dollar. The euro and sterling touched two-week lows at $1.0842 and $1.2884, respectively.

Gold prices inched higher, with spot gold up 0.3% at $2,416.39 per ounce and US gold futures rising 0.4% to $2,416.10, as investors awaited US economic data that could impact the Federal Reserve's rate-cut timeline.

Oil prices fell about 2% to a six-week low, with Brent futures down 1.7% at $81.01 a barrel and US West Texas Intermediate crude falling 1.8% to $76.96. Ceasefire talks in Gaza and concerns about Chinese demand contributed to the decline. The US dollar strengthened to a nine-day high, making oil more expensive in other currencies and potentially reducing demand.