A look at the day ahead in the US and global markets by Mike Dolan
Volatility is emerging again as a turbulent week for global markets saw politics confront a global technology disruption on Friday that exacerbated the slump in mega-cap stocks already hit by fears of new chipmaker restrictions and disappointing earnings expectations.
Major US airlines ordered ground stops on Friday due to communications problems, while other airlines, media companies, banks and telecom companies around the world also reported system outages disrupting their operations.
The Australian government said the problem there appears to be linked to a problem at global cybersecurity company Crowdstrike, whose shares fell more than 10% after hours.
The outage added to nerves in the technology sector, where the first set of earnings updates in the current reporting season failed to clear the ever-higher market bar.
Streaming giant Netflix (NASDAQ:) registered a record late Thursday when it added more than 8 million subscribers – more than the expected 5 million. But shares fell overnight on cautious guidance before saying its advertising business would not become the main driver of revenue growth until 2026.
There was a similar reaction for Taiwanese chipmaker TSMC, whose Taipei-listed shares ended 3.5% lower on Friday despite strong earnings and expectations – dragged down by Sino-US trade woes and the US market’s swoon.
Futures on Wall Street remained in the red ahead of Friday’s open, with the volatility gauge hitting its highest level since April. Thursday’s Nasdaq drop meant it was the worst two-day performance for the index since October last year, and even the small cap, which had benefited from the start of the week’s rotation away from Big Tech, fell more than 1% back.
Big tech is staggering aside, the backdrop of the increasingly uncertain US election race rattling nerves.
As Republican challenger Donald Trump – now the clear favorite on the betting markets for a return to the White House – took the stage at his party’s convention last night, pressure on President Joe Biden to step aside reached a crescendo and press reports suggesting he may announce a withdrawal. the weekend.
Perhaps by hedging bets on who can replace Biden, bookmakers have reduced the odds of a Trump victory to around 60%, from well over 70% on Monday after last weekend’s assassination attempt on the former president.
Interest rate markets were also tighter, with 10-year U.S. Treasury yields rising despite news of a sharp jump in weekly jobless claims on Thursday.
While futures are still reeling from the Federal Reserve’s first rate cut in September, the dollar recovered from the week’s low.
The euro retreated after Thursday’s expected decision by the European Central Bank to leave policy rates unchanged – with markets now expecting a second cut of the year in September but questioning the trajectory beyond that.
Sterling fell to $1.29 after poor UK retail sales in June.
The Japanese yen and both also fell, with the former beaten back by sub-expected Japanese inflation numbers that cast some doubts about Bank of Japan tightening.
The Japanese government also cut growth forecasts for this year on Friday, as consumption took a hit from rising import costs due to a weak yen.
The Mexican peso suffered sharp losses in the previous session.
However, mainland Chinese stocks held their ground again to end the week higher with a seven-session winning streak after the four-day meeting of government leaders concluded on Thursday. However, Hong Kong shares were closer to the global sentiment, losing 2% on Friday.
Amid the lack of detail, Chinese officials acknowledged Friday that the sweeping list of economic goals, which was re-emphasized at the end of the key Communist Party meeting, contained “many complex contradictions,” pointing to a bumpy road ahead for the policy.
More concrete measures could follow next week.
Back on Wall Street, an anxious end to the week beckons with the patchy trading day due to various technical issues with the global outage and with a thin diary of events and a close eye on the weekend’s politics.
Key developments that should give more direction to US markets later on Friday:
* US corporate profits: American Express (NYSE:), fifth third, Regions Financial (NYSE:), Huntington Bancshares (NASDAQ:), Travelers (NYSE:), Halliburton (NYSE:), Schlumberger (NYSE:)
* Canada June producer prices, May retail sales * New York Federal Reserve President John Williams and Atlanta Fed President Raphael Bostic speak
(mike.dolan@tNASDAQ Futures https://reut.rs/3xFdLhlhomsonreuters.com mailto:mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters Messaging: rm://mike.dolan.reuters.com@thomsonreuters .net/)
