European stocks and Wall Street futures dipped in morning trade on Thursday as traders looked to companies’ first-quarter earnings for any impact from higher interest rates and last month’s banking crisis.
Europe’s region-wide Stoxx 600 slipped 0.4 per cent, Germany’s Dax lost 0.7 per cent and London’s FTSE 100 fell 0.2 per cent.
In the US, contracts tracking the benchmark S&P 500 and the tech-heavy Nasdaq 100 fell 0.7 per cent and 1 per cent ahead of the New York open.
Those moves came after Tesla’s Elon Musk indicated he was prepared to sacrifice short-term profits to gobble up greater market share. Sharp price cuts and a 4 per cent rise in the number of vehicles delivered in the first quarter failed to enthuse investors, however, dragging the company’s shares down 6 per cent in pre-market trading on Thursday.
US equity markets have ticked higher so far this year, even as interest rates have continued to rise and three midsized lenders collapsed in March, sparking concerns of a looming credit crunch.
US inflation may have eased last month to its lowest level in nearly two years, but analysts at Morgan Stanley argued the outlook for stocks was weak because as inflation falls, “pricing power declines but inventory and other costs have already been incurred when prices were higher”.
“These challenges for earnings lead us to believe a sizeable correction is in store for US equities,” the bank said, adding that its current preference is for “high grade bonds” over stocks.
JPMorgan’s Regional Banks Index — closely watched by investors since the collapse of Silicon Valley Bank — has risen 3.7 per cent in the past week, Refinitiv data showed. It was boosted on Wednesday by a $3bn rebound in deposits at Western Alliance Bancorp, a lender perceived by investors as a bellwether for the wider sector.
Private equity group Blackstone is due to report later in the day and is forecast to reveal that assets under management in the first quarter exceeded $1tn for the first time, according to the analysts’ polled by Refinitiv. Philip Morris, AT&T and American Express are also set to report.
Elsewhere, investors will be on the lookout for signs that the hitherto resilient US labour market may be cooling. New applications for unemployment aid are forecast to have edged up to 240,000 in the week ended April 15. A week earlier, unemployment claims jumped to 239,000 claims, the highest level in more than a year.
US government debt rallied on Thursday morning, with the yield on two-year Treasuries down 0.07 percentage points to 4.19 per cent and the yield on benchmark 10-year debt down 0.05 percentage points to 3.54 per cent. The dollar index was flat against a basket of six other major currencies.
Asian stocks were mixed, with Hong Kong’s Hang Seng index rising 0.1 per cent and China’s CSI 300 down 0.3 per cent. Japan’s Topix was steady.