Alphabet and Tesla Earnings Spark Global Stock Sell-Off

Global stocks are plunging, with Japan's Nikkei falling 3% and Hong Kong's Hang Seng down nearly 2%, following disappointing earnings from Alphabet and Tesla. European markets are bracing for a continuation of the sell-off, despite a more stable recent performance compared to Wall Street and Japan. Major earnings reports today include AstraZeneca, Sanofi, Stellantis, and Nestle.

Equities

The FTSE 100 index closed down 0.2% on Wednesday, weighed down by weak luxury goods stocks and disappointing US tech earnings.

Burberry shares fell 2% following LVMH's announcement of a sales growth slowdown in the second quarter. In contrast, Aston Martin surged 6.4% after reporting positive half-yearly earnings, marking its best day in nearly two months. Precious metal miners saw a rebound with a 3% rise as gold prices firmed. EasyJet climbed 3% on reporting a 16% rise in third-quarter pretax profit, and Ascential soared 25.7% following Informa's agreement to buy the Cannes Lions Festival owner for £1.2 billion.

In the US, the S&P 500 dropped 2.31%, snapping a 356-session run without a 2% decline. This marked its worst one-day performance since December 2022. The Nasdaq fell 3.64%, its largest single-day percentage decline since October 2022, finishing at its lowest point since June 10.

Tesla shares slumped 12.3%, their worst single-day fall since September 2020, after the company reported its lowest profit margin in more than five years and missed second-quarter earnings estimates. Alphabet dropped 5%, reaching its lowest finish since May 31, despite beating second-quarter earnings expectations, as investors focused on an advertising growth slowdown and high capital expenses.

Other major US companies also saw declines, with Apple, Microsoft, Amazon, Meta Platforms, and Nvidia all closing down between 2.9% and 6.8%. Visa dropped 4% after its third-quarter revenue growth fell short of expectations. In contrast, AT&T gained 5.2% after beating forecasts for wireless subscriber additions, and solar inverter maker Enphase Energy jumped 12.8% following a second-quarter operating profit beat.

Forex & Commodities

The US dollar fell to its lowest in over two months against the yen on Wednesday as investors squared short-yen trades ahead of next week's Bank of Japan (BOJ) meeting. The yen strengthened, reaching its highest point against the euro since mid-May. The dollar index, which measures the greenback against six currencies, including the yen and the euro, declined 0.12% to 104.35, though it recovered slightly after the US Composite PMI Output Index for July rose to 55.0.

Expectations are high for the BOJ to consider raising interest rates and reducing bond purchases at its July 30-31 meeting. Meanwhile, the Federal Reserve is also set to meet on the same date, with market watchers anticipating stronger signals of a potential rate cut in September due to declining inflation and slower growth. The yen has been the best-performing G-10 currency against the dollar this month, gaining 1.07% to 153.92, while the euro fell 1.16% to 166.915 yen.

Commodity-linked currencies saw declines, with the Australian dollar falling to US$0.6584 and the Canadian dollar weakening to 1.3808 per US dollar. The New Zealand dollar dropped to US$0.5927 amid softer demand in China and Asia.

Gold prices fell more than 1% on Thursday as investors took profits ahead of key US economic data releases, including GDP and the Personal Consumption Expenditures Price Index. Spot gold declined 1.2% to $2,369.20 per ounce, while US gold futures dropped 1.8% to $2,373.00. Silver fell 4.2% to $27.78 per ounce, and platinum and palladium both saw declines.

Oil prices edged higher due to large declines in US crude and fuel stocks, despite concerns over weak global demand. Brent crude futures rose 0.9% to $81.71 a barrel, and US West Texas Intermediate crude gained 0.8% to $77.59 per barrel. US crude inventories fell by 3.7 million barrels last week, with gasoline and distillate stockpiles also dropping significantly.