Stocks Slump as Profit Warnings Dull China Boost: Markets Wrap

(Bloomberg) — European stocks started off the week on the backfoot as a slew of profit warnings from automakers dulled the boost from China’s economic stimulus measures.

Europe’s Stoxx 600 slumped 0.7%, paced by declines in automakers after Jeep maker Stellantis NV cut its profit margin forecast. That came after Volkswagen AG on Friday issued its second profit warning in three months. In the luxury segment of autos, Aston Martin Lagonda Global Holdings Plc said its 2024 Ebitda will be below last year’s.

That was in contrast to the mood in China, where the CSI 300 Index jumped as much as 9.1%, the most since 2008, after the country’s latest stimulus measures. Futures on the S&P 500 were steady while Treasuries slipped.

While the rebound fed through to outperformance for European miners and luxury stocks whose key markets are in China, the region’s stocks may need stronger tailwinds in the second half, according to Marcus Poppe, co-head of European equities at DWS Investment. 

“Right now we see an improvement in sentiment, which is driven by more stringent action that we see in China, that is good news for the European equity markets,” Poppe said in an interview with Bloomberg TV. “But I would caution against expecting that we will see in three four weeks companies saying: China is picking up.”

Investors face a cocktail of risks, from a growth slowdown to rising tensions in the Middle East. The rally will also be tested by third-quarter corporate results set to kick off in mid-October.

Later this week, traders will be paying close attention to Eurozone inflation and manufacturing activity data, as well as the US jobs report on Friday, which will help assess the outlook for Federal Reserve interest-rate cuts into year-end.

Political developments in Europe constitute an additional risk. Austria’s traditional political powers are pledging to block the far-right Freedom Party from forming a government following Sunday’s national elections that resulted in its historic victory. 

Tensions in the Middle East were at risk of escalating once again after Israel’s killing of Hezbollah’s leader, Hassan Nasrallah, in Beirut. Oil rose on Monday, with the market waiting to see how Iran will respond and as traders responded to China’s stimulus measures.

Key events this week: 

• Italy, Germany CPI on Monday
• Fed Chair Jerome Powell delivers speech at National Association for Business Economics conference in Nashville on Monday
• European Central Bank President Christine Lagarde speaks at EU Parliament monetary dialogue on Monday
• Bank of England policy maker Megan Greene joins panel at NABE to discuss global monetary policy on Monday
• Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins attend conference on Tuesday
• ECB policy makers speaking at various locations include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday
• BOE chief economist Huw Pill speaks at Confederation of British Industry economic growth board on Tuesday
• Bank of Japan issues summary of opinions for September on Tuesday
• South Korea CPI, S&P Global Manufacturing PMI on Wednesday
• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.7% as of 9:47 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures fell 0.1%
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 1%
• The MSCI Emerging Markets Index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.3% to $1.1198
• The Japanese yen fell 0.1% to 142.41 per dollar
• The offshore yuan fell 0.2% to 6.9945 per dollar
• The British pound rose 0.4% to $1.3422

Cryptocurrencies

• Bitcoin fell 2.7% to $64,068.51
• Ether fell 1% to $2,633.85

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.78%
• Germany’s 10-year yield advanced four basis points to 2.17%
• Britain’s 10-year yield advanced four basis points to 4.01%

Commodities

• Brent crude rose 0.9% to $72.60 a barrel
• Spot gold fell 0.2% to $2,653.78 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Chris Bourke, Matthew Burgess, Winnie Hsu, Catherine Bosley and Sagarika Jaisinghani.

©2024 Bloomberg L.P.