Japan is setting the stage for a monetary policy review. Falling tech companies are dragging the broad market

By JustMarkets

As of Thursday’s stock market close, the Dow Jones Index (US30) decreased by 0.76%, while the S&P 500 Index (US500) fell by 1.18%. The NASDAQ Technology Index (US100) closed yesterday negative by 1.76%. Stock indices continued to fall yesterday due to weak reports from major technology companies. Shares of Meta Platforms (META) fell more than 5% after weak ad revenue. Meanwhile, shares of Alphabet (GOOG) fell another 2.6%, complementing Wednesday’s 9.28% drop amid a disappointing cloud computing revenue report. Amazon (AMZN) reported third-quarter results that beat Wall Street forecasts as growth in the company’s cloud business continues to stabilize. But the stock price was barely affected by the report.

Stocks also declined yesterday due to tensions in the Middle East following a report that Israel conducted a limited tank invasion of the Gaza Strip before withdrawing troops. Markets expect an all-out ground attack by Israel, which could lead to an expansion of the war to include Hezbollah.

The US economy grew by 4.9% in the third quarter, with households and construction contributing significantly to growth. However, the unfavorable factors facing the economy and the household sector in particular are intensifying, so economists expect growth to slow to 1.5% in the last three months of the year. Also strong is the 4.7% rise in US durable goods orders for September, which is much stronger than expectations of rising by 1.9%. US weekly jobless claims rose by 10,000 to 210,000, indicating a slightly weaker labor market compared to expectations for a rise to 207,000.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.08%, France’s CAC 40 (FR40) lost 0.38% on Thursday, Spain’s IBEX 35 (ES35) decreased by 0.28%, and the UK’s FTSE 100 (UK100) closed negative by 0.81%.

The European Central Bank (ECB) left key rates unchanged on Thursday, in line with market expectations: the deposit rate at 4.00% and the main refinancing rate at 4.50%. Markets had expected the ECB to suspend its rate hike regime on Thursday, given the weakness in the eurozone economy and the recent rise in European bond yields. There is only a 5% chance of an ECB rate hike at the December meeting, but markets are forecasting an ECB rate cut in 2024.

Natural gas prices rose on Thursday amid a bullish EIA report and forecasts of colder-than-normal weather for next week. Natural gas prices received support from global supply concerns after Chevron shut down a natural gas field in Israel over security concerns related to the conflict between Israel and Hamas. As a result of the supply cut, Egypt said it was reviewing plans to export LNG to Europe.

Asian markets were predominantly falling yesterday. Japan’s Nikkei 225 (JP225) fell by 2.14%, FTSE China A50 (CHA50) added 0.63%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.24%, and Australia’s ASX 200 (AU200) ended Thursday negative by 0.61%. Uncertainty over the war between Israel and Hamas and rising yields led Asian indices lower this week, while anticipation of a series of central bank meetings next week also made investors largely risk-averse.

With the Bank of Japan conducting another FX intervention yesterday, markets expect the BoJ to consider a change in yield curve management policy next week with an adjustment to the outlook. The latest data showed that Tokyo’s inflation rose more than expected in October, indicating that inflation is picking up again in the country and could lead to a more hawkish bias from the BoJ at its meeting next Tuesday.

S&P 500 (F)(US500) 4,137.23 −49.54 (−1.18%)

Dow Jones (US30) 32,784.30 −251.63 (−0.76%)

DAX (DE40)  14,731.05 −161.13 (−1.08%)

FTSE 100 (UK100) 7,354.57 −59.77 (−0.81%)

USD Index  106.65 +0.12 (+0.11%)

• – Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
• – Japan Tokyo Core CPI (m/m) at 02:30 (GMT+3);
• – Australia Producer Price Index at 03:30 (GMT+3);
• – US PCE Price index (m/m) at 15:30 (GMT+3);
• – US FOMC Member Barr Speaks at 16:00 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.