FT: US equity futures slip as growth worries weigh
Thursday 12:40 BST. Stocks are struggling for traction, encouraging buying of government bonds, as more disappointing economic data and another corporate shock from Germany subdue investors’ risk appetite.
US index futures indicate the S&P 500 will fall 7 points to 1,979, retreating from a near seven-week closing high having risen for six of the last seven sessions.
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In choppy trading the FTSE Eurofirst 300 is flat after financials came under pressure following the surprise news of Deutsche Bank’s €6.2bn third-quarter loss — though DB’s shares have managed to recover initial losses with the sector helped by Moody’s lifting its outlook on German banks.
The banking giant’s difficulties come as executives from compatriot Volkswagen are due in Washington on Thursday to testify on the emissions scandal that has rocked the European car industry.
The developments find an investor base already nervous about corporate prospects as the third-quarter earnings season kicks into gear with Alcoa’s results after Wall Street’s closing bell.
Analysts expect S&P 500 Q3 earnings to fall 5.1 per cent from a year ago, the first decline in earnings growth since the third quarter of 2009, according to S&P Capital IQ. Just six months ago analysts had been forecasting S&P 500 profit growth of 1.3 per cent.
The Q3 fall is driven mainly by an expected 65.8 per cent drop for profits in the energy sector because of low oil prices. Brent crude is up 0.5 per cent on the day to $51.56 a barrel but down more than 40 per cent from a year ago.
Weakness in other industrial commodities is forecast to cause a 14.5 per cent profit crunch for materials companies, too.
Raw material prices have been under pressure on concerns that a slowing global economy will reduce demand amid ample supply. Copper is off 1.5 per cent to $5,131 a tonne in a generally soft base metals sector.
And there has been more disappointing news on the global macro front. German exports fell 5.2 per cent in August from July, and Japan’s core machinery orders, regarded as a proxy for private capital spending, fell by 5.7 per cent in August, against expectations for a 3.2 per cent gain.
The Japanese data “all but confirmed that non-residential investment contracted yet again in the third quarter,” said Marcel Thieliant, economist at Capital Economics.
The news may add to expectations that the Bank of Japan, which left monetary policy unchanged at this week’s meeting, nevertheless will soon increase its stimulus measures to boost growth.
Japan’s Nikkei 225 fell 1 per cent, amid a sour regional mood, though mainland China markets returned from the Golden Week holiday to play some catch up, the Shanghai Composite bouncing 3 per cent.
The Japanese yen normally weakens on expectations of more BoJ action but on Thursday it is strengthening by 0.1 per cent to Y119.85 as traders favour the unit’s perceived haven status.
That characteristic is also attached to core government bonds. Consequently, the softer US futures and global growth concerns see US 10-year Treasury yields, which move inversely to their price, slip 2 basis points to 2.04 per cent.
Equivalent maturity German Bunds are easing 4bp to 0.56 per cent and the euro is up 0.5 per cent to $1.1306 as traders absorb the latest minutes from the European Central Bank.
Benchmark UK Gilt yields are slipping 4bp to 1.79 and sterling is off 0.1 per cent to $1.5306 after the Bank of England left interest rates at 0.5 per cent but delivered a slightly more dovish than expected explanation for its decision.
Gold is down $1 to $1,144 an ounce.
