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Stocks drop with Middle East, earnings season in focus

Fears of an expansion of the war between Hamas and Israel pressured stock markets midweek. While hopes for a diplomatic solution to the Middle East conflict had initially kept markets afloat, the sentiment has shifted with no quick fix in sight. While stocks dropped around the globe, oil prices were on the rise and safe-have assets such as gold were in demand. The yield on the 10-year Treasury broke above 4.9% for the first time since 2007.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
market numbers
© Shutterstock

US President Joe Biden’s visit to Israel failed to calm investors’ worries about a potential expansion of the conflict. He suggested the recent blast at a hospital in Gaza that killed hundreds was not caused by Israel when he met with Israeli Prime Minister Benjamin Netanyahu in Israel on Wednesday. The US President will not be continuing on to Jordan where he was previously scheduled to meet with the leaders of Jordan, Egypt and the Palestinian Authority.

In the Asia-Pacific region, stock markets were seeing a broad sell-off in Thursday trading. Japan’s trade surplus of 62.4 billion yen came in higher than expected, but that couldn’t save Japanese stocks from losses. In Tokyo, the Nikkei 225 was down 1.8%. In South Korea, the Kospi lost 1.9%. In Australia, the S&P/ASX 200 lost all gains it had made this week, falling 1.4% despite its unemployment rate falling to 3.6%. Hong Kong's Hang Seng Index slumped 2%, while the Shanghai Composite dropped 1.2%.

In New York, stock indices were under pressure on Wednesday from the deteriorating situation in Israel as well as volatile quarterly earnings reports. The Dow Jones Industrial closed 1% lower and the S&P 500 dropped 1.3%. The tech-heavy Nasdaq-100 fell 1.4%.

The quarterly earnings season was in full force in the meantime with semiconductor shares moving midweek after the US government announced tighter export restrictions for chips headed to China. Shares of chipmaker Nvidia lost 4% on Wednesday. ASML shares were down 4.2% after the Dutch semiconductor manufacturer delivered a disappointing earnings report with weak orders. After reporting quarterly earnings, Morgan Stanley lost 6.8%, ABB’s stock plummeted 6.5%, Tesla shares fell 4.8% and Adidas climbed 3.2%.

In Europe, inflation data was beginning to paint a picture of two different speeds of deceleration. In the UK, inflation came in hotter than market expectations with consumer prices rising 6.7% in September. That’s unchanged from August. In the euro area, the final inflation reading for September was confirmed: Prices increased at 4.3% on the year, down from 5.2% in August. The Euro Stoxx 50 finished Wednesday’s session down 1.1%.

Corporate news in focus: Q3 revenue from Roche, Renault, Nestlé, LSE, L'Oréal; Q3 figures from Schindler, Inficon, Nokia, Taiwan Semiconductor, AT&T, Philip Morris, Nordea Bank; Capital Markets Day at Merck KGaA and Hewlett Packard Enterprise.

Economic data in focus: Swiss trade balance (08:00 CET), US weekly initial jobless claims (14:30), Philly Fed Index (14:30), US existing home sales (16:00), Federal Reserve Chair Jerome Powell speaks at the Economic Club of New York (18:00).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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