Equity markets across Europe ended lower on Thursday, erasing most of the gains made earlier in the week. Major European indices faced a reality check due to the ripple effect from Wall Street, which experienced a swift retracement following a surge on Wednesday. Additionally, disappointing earnings results from Siemens added further downward pressure on the markets.
Over the five-day trading period, the FTSE 100 rose by 0.68%, the Euro Stoxx 600 climbed 1.26%, the DAX advanced by 0.21%, while the CAC 40 fell by 0.54%.
Energy stocks were the biggest laggards over the past five trading days, with Shell's shares down 3.3%, BP's slipping 2.3%, and TotalEnergies' falling 3.2%. This might be due to sliding crude prices recently. Conversely, the mining sector shone, buoyed by surging base metal prices. Copper futures spiked to an all-time high above $5 per pound on Wednesday before pulling back to around $4.8 per pound on Friday. Glencore's shares rose 7.1%, and Rio Tinto's stocks increased by 1.6% during this period. However, Anglo-American's shares experienced a weekly slump of 3.8%, following the British mining company's announcement of a restructuring plan to fend off the takeover offer from BHP.
On the earnings front, Vodafone’s shares surged more than 11% amid strong quarterly earnings results. The British telecommunication company reported core earnings of 11.02 billion euros with an adjusted free cash flow of 2.6 billion euros. Vodafone saw revenue growth in all regional markets after the company sold its operations in Spain and Italy.
On the flip side, Siemens' shares plummeted nearly 7% following an earnings decline in the March quarter. The German technology giant reported a profit of 2.51 billion euros, down 2% from the previous year, with net income slipping 38% year-on-year to 2.2 billion euros. The company's revenue was primarily impacted by weakened demand in China, though CEO Roland Busch indicated that Chinese demand is expected to rebound.
In the foreign exchange market, both the euro and the British pound jumped to a one-month high against the US dollar as the dollar softened following cooler CPI data in the United States (US). However, divergent stances among central banks may continue to pressure the euro and the pound. Both the European Central Bank and the Bank of England have signaled potential near-term rate cuts, while the Federal Reserve remains hesitant to rule out reducing its policy rates.
Wall Street
The US stock markets surged to all-time highs after the country reported cooled inflation that met market expectations earlier in the week. However, Wall Street pulled back on Thursday, possibly due to profit-taking and technical retracement.
The Dow Jones Industrial Average reached a historic milestone, topping 40,000 for the first time before experiencing a retreat. Over the past five trading days, the Dow was up 1.22%, the S&P 500 rose 1.59%, and the Nasdaq advanced 2.15%.
At a sector level, the technology sector led to broad gains in the S&P 500, rising by 2.8% over a five-day trading period. Semiconductors stocks notably outperformed, with Nvidia surging 6.3%, Advanced Micro Devices jumping 6.7%, and Broadcom soaring 8% weekly. Most Magnificent Seven stocks saw gains ranging from 2% to 6%. However, Amazon and Meta Platforms underperformed, declining by 3.1% and 0.46% respectively during the same period.
On the other hand, the energy and industrial sectors were the biggest laggards, experiencing declines of 0.78% and 0.85% respectively over a five-day trading period. This could be attributed to funds rotating into growth sectors from cyclical sectors, fueled by hopes that the Federal Reserve would soon lower interest rates.
Company earnings presented a mixed picture for major consumer stocks. Home improvement retailer Home Depot reported quarterly revenue that fell short of Wall Street's expectations, despite exceeding the earnings per share estimate. The company's shares were down 1.3% weekly. This result suggests that high interest rates have delayed household spending on home improvement projects. In contrast, the largest grocery retailer, Walmart, saw its stocks reach an all-time high following an earnings beat.
Asian Markets
Major Asian indices are poised for a positive weekly close, although the bullish momentum tapered off on Friday.
The Biden administration's announcement of a new tariff on Chinese imported goods triggered a pullback in the Chinese mainland stock markets. However, the Hang Seng Index remained resilient, bolstered by positive tech earnings reports for the week. As of 10:30 AM local time on Friday, the index was up 2.52% over the past five days. Chinese tech giant Tencent reported first-quarter earnings that exceeded estimates, with a remarkable 62% year-on-year surge in net income. As a result, its shares climbed 6.7% for the week.
Australian and Japanese stock markets continued their bullish momentum, with the ASX 200 rising by 1.19% and the Nikkei 225 climbing 1.36% over the past five trading days. The Australian stock markets rallied following the release of job data indicating an increase in the country's unemployment rate. This data reinforced expectations for the Reserve Bank of Australia to consider interest rate cuts later this year.
