Tech stocks pull down equity markets; euro gains vs dollar

Oil rise on tighter supply expectations

NEW YORK, July 30, (Agencies): The dollar slipped against the euro on Monday ahead of key central bank monetary policy meetings this week and a gauge of global equity markets fell, pulled down by a slide in US technology heavyweights.

Most major currencies stuck to narrow trading ranges as the Bank of Japan ends a two-day meeting on Tuesday, the Federal Reserve concludes its policy meeting on Wednesday, and the Bank of England is expected to raise interest rates on Thursday.

Shares in Europe fell, led by a 2.9 percent decline in software maker SAP SE, with the FTSEurofirst 300 index of leading European shares closing down 0.26 percent.

MSCI’s all-country world stock index fell 0.22 percent, pulled lower by marquee tech stocks Facebook , Microsoft, Amazon.com and Netflix .

Stocks on Wall Street also were lower on the tech sell-off.

The Dow Jones Industrial Average fell 52.6 points, or 0.21 percent, to 25,398.46. The S&P 500 lost 9.01 points, or 0.32 percent, to 2,809.81 and the Nasdaq Composite dropped 77.91 points, or 1.01 percent, to 7,659.51.

Industrials, energy and materials led gainers on Wall Street, with Caterpillar Inc raising its full-year outlook after second-quarter earnings nearly doubled and beat expectations, helped by robust global demand for its equipment.

The S&P energy sector jumped 0.85 percent as oil prices gained, with investors remaining cautious over the supply outlook and a potential hit to global output due to US sanctions on Iran.

US crude rose $1.38 to $70.07 a barrel while Brent was last up 66 cents at $74.95.

The dollar slipped the most against the euro, with the common currency 0.51 percent higher as it recovered from its worst weekly performance against the greenback in six weeks. The euro suffered sharp losses last week after the European Central Bank reaffirmed that rates would stay low through next year’s summer.

US

The Nasdaq Composite fell more than 1 percent on Monday for the third straight session, as disappointing forecasts from a clutch of technology and internet companies fueled worries about the continued growth of the highflying tech sector.

Gains by energy companies, as oil prices rose, and bank stocks ahead of the Federal Reserve meeting helped the benchmark S&P 500 cut its losses.

The technology index tumbled 1.65 percent, falling more than 1.5 percent for the third straight day as underwhelming results from the likes of Facebook and Netflix spooked investors about the prospects of a sector that has led the equity market to record highs.

The so-called FAANG group fell on Monday. Facebook dropped 4.3 percent and Netflix slid 4.6 percent. Amazon declined 1.2 percent and Alphabet dropped 1.5 percent despite both reporting healthy results.

Apple, which is due to report earnings on Tuesday after the bell, fell 0.6 percent.

“Investors are still trying to digest results from FAANG stocks last week, and trying to figure out if it’s just another bump in the road or if something more meaningful is in play,” said Cliff Hodge, director of investments for Cornerstone Wealth in Charlotte, North Carolina.

Still, six of the 11 major S&P sectors were higher. The biggest boost to the market was from the energy sector’s 0.63 percent gain as oil prices rose with investors remaining cautious over supply outlook.

At 11:29 a.m. EDT the Dow Jones Industrial Average was down 42.84 points, or 0.17 percent, at 25,408.22, the S&P 500 was down 9.45 points, or 0.34 percent, at 2,809.37 and the Nasdaq was down 82.14 points, or 1.06 percent, at 7,655.28.

Still, declining issues outnumbered advancers for a 1.06-to-1 ratio on the Nasdaq. Advancing issues outnumbered decliners for a 1.34-to-1 ratio on the NYSE.

Caterpillar’s shares were up 0.5 percent, easing from higher gains before the bell when the heavy equipment maker reported a second-quarter profit that beat estimates and raised its fullyear profit outlook.

AT&T rose 2.9 percent and led the telecoms sector 2.36 percent higher after Bank of America upgraded the wireless carrier’s stock, according to CNBC.

Financial stocks gained 0.29 percent ahead of the Federal Reserve’s meeting on Tuesday and Wednesday.

American Express fell 2.6 percent after the Wall Street Journal reported the company raised currency conversion rates for its business clients without notifying them.

Tyson Foods dropped 6.6 percent after cutting its full-year profit forecast, saying uncertain trade policies and higher tariffs hurt domestic and export prices, specifically for chicken and pork.

The warning also weighed on the shares of Hormel Foods , Sanderson Farms and Pilgrim’s Pride, which fell between 0.3 and 2.3 percent.

The S&P index recorded 13 new 52week highs and two new lows, while the Nasdaq recorded 22 new highs and 64 new lows.

Europe

European shares retreated from a six-week high on Monday as industrials and tech stocks slipped and disappointing earnings, including from brewer Heineken, dented investors’ confidence.

The pan-European STOXX 600 fell 0.3 percent, starting a packed earnings week on the back foot after sealing on Friday its strongest weekly gain in nearly five weeks. Germany’s DAX edged down 0.5 percent.

A negative open on Wall Street also comforted traders to stick to a risk-off mode until the close.

Shares in Heineken tumbled 6.5 percent to the bottom of the STOXX after the world’s second largest beer maker reported weaker than expected first-half earnings and cut its full-year margin guidance.

France’s Air Liquide fell 2.5 percent to the bottom of the CAC 40 after its first-half operating income proved disappointing.

Another faller after earnings was Siemens Healthineers , which declined 2 percent after the world’s largest maker of medical-imaging gear reported a 10 percent slump in net profit, driven down by a strong dollar.

Its parent company Siemens also fell 0.4 percent, one of the biggest weights among industrials stocks.

Several companies however delivered positive results, including German industrial machinery group GEA, which rose 4.5 percent to a three-month high after it reported.

British bookmaker GVC, which owns the Ladbrokes and Coral brands, climbed 5.4 percent to a record high after announcing it had sealed a joint venture with MGM Resorts to set up an online betting platform in the United States.

Shore Capital analyst Greg Johnson said US sports betting could grow to be a $20 billion market, and saw a 10 percent market share as potentially generating value of 270p per share for GVC.

Deutsche Bank shares also rose 2.9 percent after the German lender said it had moved a large part of its euro clearing activity to Frankfurt from London.

Earnings aside, the tech sector declined 1.6 percent, reflecting moves in Asia and Wall Street after shocking drops in big tech names Twitter and Facebook last week shook investors’ belief in tech’s resilience.

Cap Gemini and SAP, heavyweights in tech, fell 2.2 and 2.9 percent.

Overall, MSCI Europe earnings are expected to grow 8.4 percent year-onyear in the second quarter, Thomson Reuters data shows. Earnings growth for the index is also being revised up for 2018 and 2019.

But Goldman Sachs analysts say the rate of positive earnings surprises is trailing the historical average thus far in Q2.

Asia

Asian markets dropped Monday, following Wall Street’s downbeat finish last week on fears that US economic growth has peaked, and with investors cautious ahead of key central bank meetings.

Japan’s benchmark Nikkei 225 index ended down 0.74 percent at 22,544.84, while the broader Topix index slipped 0.43 percent to 1,768.15.

China’s stock markets also closed lower, with the tech-heavy Shenzhen index leading the losses.

The benchmark Shanghai Composite Index eased 0.16 percent to 2,869.05, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 1.39 percent.

Markets were down elsewhere in the region, including Hong Kong, Seoul and Sydney, where the benchmark S&P/ASX 200 fell 21.8 points, or 0.35 percent, to close at 6,278.4. Key figures at 0500 GMT Tokyo — Nikkei 225: Down 0.74 percent at 22,544.84 (close)

Hong Kong — Hang Seng: Down 0.37 percent at 28,697.45

Shanghai — Composite: Down 0.16 percent at 2,869.05(close)

Dollar/yen: Down at 111.04 from 111.05

Oil

Oil gained on Monday as investors remained cautious over the supply outlook, having gained nearly 5 percent in price since the middle of July.

October Brent crude futures were last up 71 cents at $75.47 a barrel by 1424 GMT. The September contract expires on Tuesday. US crude futures rose $1.37 at $70.06 a barrel.

The oil price has rallied almost uninterruptedly for the past two weeks, as looming sanctions on Iran have already started to curtail flows of oil from the country.

“Concerns around the US-China trade wars continue to weigh on prices, while the halt in Saudi shipments through the Red Sea waterway has seemingly failed to provide a bullish fillip,” said Stephen Innes, head of trading APAC at OANDA Brokerage.

Saudi Arabia last week said it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important tanker routes, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway.

“Geopolitical risk in the Gulf has evolved with a stoppage of Saudi exports via the Bab al-Mandeb strait and thinly veiled remarks from Iran on the passage of oil via the strait of Hormuz,” BNP Paribas head of commodity research Harry Tchilinguirian said in the Reuters Global Oil Forum.

“So all in all, supply conditions remain favourable for oil to rally.”

US energy companies added three oil rigs in the week to July 27, the first time in the past three weeks that drillers have increased activity, data on Friday showed.

Gold

Gold steadied on Monday ahead of a meeting of the US Federal Reserve this week which could yield clues to the future direction of US interest rates and the dollar, key factors for precious metal prices.

Spot gold was a touch firmer at $1,223.21 an ounce at 1339 GMT compared with a one-year low of $1,211.08 hit earlier this month. US gold futures were 0.1 percent lower at $1,222.60 an ounce.

A higher US currency makes dollardenominated gold more expensive for holders of other currencies, which could subdue demand. Dollar gains since the middle of April have led to losses of about 10 percent for spot gold.