(Bloomberg) — European stocks and US equity futures dropped as disappointing earnings from Apple Inc., Amazon.com Inc. and Alphabet Inc. poured cold water on the rally fueled by investor optimism that rates are getting close to peaking.
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Positive sentiment from this week’s surge in the Nasdaq 100 and S&P 500 evaporated as investors parsed late results from the tech trio that showed an economic slowdown is throttling demand for electronics, e-commerce, cloud computing and digital advertising. Their shares slumped more than 5% each in premarket trading.
Treasury yields held Thursday’s drop and a gauge of the dollar gained for a second day.
Investors have been cheering what they perceive as varying degrees of dovish tilts from central banks this week. Chair Jerome Powell said Wednesday the Federal Reserve had made progress in its inflation battle even as labor-market data continues to show tightness that could add to wage pressures. Payrolls data due later Friday may show the US jobs market softening, complicating the Fed’s task.
“Risk markets are buoyed by lower implied policy rates and expectations that the Fed will achieve a soft landing,” Alex Rohner, a fixed-income strategist at Bank J Safra Sarasin Ltd. wrote in a note. “This will be very hard to achieve. In fact, substantial tightening cycles such as the current one have historically led to a sharp rise in unemployment, and a recession.”
The Stoxx Europe index retreated after closing within a whisker of a bull market on Thursday, with all industry groups in the red on Friday. French drugmaker Sanofi was the biggest decliner in index-points terms after forecasting a slowdown in profit growth this year. Carmakers also weighed on the index, following US peers lower after Ford Motor Co.’s disappointing earnings report.
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Asian shares were mixed, with a regional index slipping with Chinese stocks while Japanese and Australian benchmarks eked out gains.
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