Stocks fall as supply issues hit earnings, rate worries weigh

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  • Global stock prices hit a record high
  • The yield curve flattens sharply as short rates rise
  • BoC suggests early rate hike, RBA shakes bond market
  • European equities have changed little

TOKYO, Oct.28 (Reuters) – Global stocks retreated after record highs, with corporate earnings reports starkly reminding current supply chain challenges, while investors also looked to upcoming meetings of the central bank to assess whether a policy tightening could occur sooner.

The MSCI indicator of global equities, ACWI, fell 0.05% (.MIWD00000PUS) in Asia, with the Japanese Nikkei (.N225) leading the losses with a fall of 0.9%.

Mainland China stocks (.CSI300) fell 0.3%, while the MSCI’s largest Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.25%.

European stocks are expected to open flat as Euro Stoxx futures and UK FTSE futures have changed little on this day.

Overnight on Wall Street, the S&P 500 (.SPX) lost 0.51% from an all-time high of 4,574.79 hit Tuesday, while the Nasdaq (.IXIC) closed the session little changed , thanks to strong profits from Microsoft (MSFT.O) and Google’s parent alphabet (GOOGL.O).

But other earnings reports have shown the biggest U.S. manufacturers, including General Motors (GM.N), General Electric (GE.N), 3M (MMM.N) and Boeing (BA.N) are facing logistics issues and higher costs due to global sourcing. bottlenecks that are expected to persist next year. Read more

GM lost 5.4% after the publication of its results on Wednesday. Read more

In Asia, Japanese robot maker Fanuc (6954.T) fell 7.8% while IT conglomerate Fujitsu (6702.T) lost 8.4% as revenue showed a bigger impact than expected global chip shortage.

South Korean tech giant Samsung Electronics (005930.KS) rose 3% after windfall profits, but said it expects component shortages to affect demand for chips from some customers in the during the last three months of the year. [nL1N2RO001]

“The working assumption in the market was that the impact of a chip shortage will wear off by the end of the year. But if this remains a problem next year, investors will surely be less confident. as to the outlook, “said Masayuki Murata, Managing Director. balanced portfolio investment at Sumitomo Life Insurance.

With global supply disruption fueling concerns about inflation, investors are watching closely whether major central banks will seek to reduce their generous stimulus packages more quickly in the event of a pandemic.

The Bank of Canada ended its quantitative easing earlier than expected and signaled on Wednesday that it could raise interest rates earlier than expected, as early as April 2022.

The Reserve Bank of Australia jumped an opportunity to buy a government bond that is the keystone of its yield curve control policy, pushing yields above target. Read more

The country’s bond yield in April 2024 jumped above 0.5%, well above the policy target of 0.1%, as interest rate futures forecast higher prices. rate as of May.

Investors also suspect the U.S. Federal Reserve of moving faster toward rate hikes, with federal funds term rates predicting two rate hikes by the end of 2022.

The Fed is expected to announce the reduction in its bond purchases at its policy meeting next week.

The yield on two-year US Treasuries climbed to 0.534%. At the start of October, it was around 0.26%.

In contrast, longer-term yields have fallen in part because tighter monetary policy is likely to bring inflation under control and could derail the economic recovery over time.

US 10-year bond yields fell to 1.554%, from a five-month high of 1.705% reached a week ago.

“Long-term yields fall on fears that tighter monetary policies will constrain the economy in the long run,” said Naokazu Koshimizu, senior rate strategist at Nomura Securities.

Meanwhile, UK government bond yields fell after the government cut its borrowing forecast more than expected. Read more

The 10-year Gilt yield fell 12.8 basis points on Wednesday, its biggest drop since March 2020, to 0.982%.

In currency markets, the Canadian dollar held steady at C $ 1.2362 to the dollar following the BoC’s surprise decision.

The yen reacted in a limited way to the Bank of Japan’s decision to hold its policy in abeyance and stood at 113.55 per dollar, up 0.2%.

The euro was stable at $ 1.1600 ahead of the European Central Bank’s policy announcement later today.

Oil prices fell after official figures showed a surprise jump in US crude inventories.

Brent fell 1.8% to $ 83.07 a barrel, following its seven-year high of $ 86.70 on Monday. U.S. crude hit $ 81.25 a barrel, down 1.7% and after a seven-year high of $ 85.41 reached on Monday.

Editing by Shri Navaratnam and Ana Nicolaci da Costa

Our Standards: The Thomson Reuters Trust Principles.

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