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Thursday, August 5, 2021
Stocks & Shares

Global equity markets drop from near record highs

Global equity

Wall Street was lower even as the four largest US consumer banks posted higher-than-expected results for the second quarter earlier this week

A measure of global equity markets dropped from near record highs, the dollar inched up and bond yields dropped on Thursday as investors mulled the Fed’s benign inflation outlook and upbeat assessment of the US economy.

The number of Americans filing new claims for unemployment benefits dropped to a 16-month low last week as the US labour market steadily gains traction, while other data showed import prices increased solidly in June but have probably peaked.

Wall Street traded lower even as the four largest US consumer banks posted higher-than-expected Q2 results earlier this week.

Investors are looking for visibility into future earnings as stocks have already surged in anticipation of stellar growth.

We had the rally going into the earnings season. Now that we’re actually here, we’re seeing some softness. I wouldn’t be surprised if we don’t see a lot of strength during this reporting season, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Analysts expect strong earnings, with IBES data from Refinitiv showing consensus looking for a 65.8 per cent gain from a year ago, making corporate guidance more important than results.

Energy and technology stocks led the decline on Wall Street, with defensive consumer staples and utilities the only two of 11S&P 500 sectors to gain. Staples have pricing power that could help Procter & Gamble Co, Coca-Cola Co and others rise, once it is clear their margins remain intact, said Tom Hayes, founder and managing member of Great Hill Capital LLC.

Guidance is the name of the game. A lot of good news is already baked into the market and even with strong guidance, you may get a breather here, Hayes said.

The MSCI world equity index ended 0.33 per cent lower at 723.66, after touching a record high on Wednesday. Europe’s broad FTSEurofirst300 index ended 0.92 per cent lower at 1,761.30, less than 20 points from an all-time peak set on Monday.

Losses in Europe were broad-based, with economically sensitive stocks such as banks, automakers and travel down between 0.3 per cent and 1.6 per cent as investors grew wary of rising Covid-19 cases and their potential economic impact.

On Wall Street, the Dow Jones Industrial Average (DJIA) eked out a 0.15 per cent gain, but the S&P 500 shed 0.33 per cent and the Nasdaq Composite declined 0.70 per cent.

The 10-year Treasury note dropped 5.9 basis points to yield 1.2972 per cent, while the dollar index gained 0.19 per cent to 92.586.

The rally in US and European bond prices, which show the inverse of yields, suggested growing investor caution.

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