Microsoft and Google both surprised investors with better-than-expected earnings reports on Wednesday, which ended up giving a boost to the stock market.
But the euro stagnated as Russia cut off the supply of gas that powered Europe’s economy, while a Federal Reserve meeting later in the day put bonds and the dollar on edge.
The news that Microsoft and Google parent Alphabet forecasted strong revenue growth led to a bump in Nasdaq 100 futures of 1.4%, while S&P 500 index futures rose 0.8%.
Meanwhile, Alphabet shares were up 5% after trading hours, and Microsoft shares hiked 4% to go beyond a few of the murky cast over Tuesday by a profit caution at Walmart and a few soft US economic data.
The MSCI Asia-Pacific Index fell 0.6%, with the Japanese Nikkei index falling 0.3%, leading all others in decline today.
Investors are concerned about a shocker in both directions and have chosen safe assets like dollars. The Federal Reserve will likely announce an increase of 75 basis points at 1800 GMT.
“The market is trying to convince itself that peak inflation has happened,” which would be a ground for more clarity and hope about future rates and growth, according to Rob Carnell, an ING economist, but that indicates a Fed that is remaining in the course.
“[The Fed] does need to give the sense that fighting inflation is their number one priority; otherwise, the sense is that inflation will stay higher for longer,” he said.
Wednesday saw a sort of caution from Australian data, as headline consumer prices hiked at their quickest speed in two decades.
Conversely, a 75 bp rise in the United States is fully priced on Wednesday. However, futures indicate around 15% odds of a 100 bp rise. The Treasury market is now expecting that near-term rises will ruin longer-run growth.
Benchmark 10-year Treasury yields were stable at 2.8068%, under the two-year yields at 3.0528%.
Europe, China Unstable
Europe is experiencing an energy crisis, while China has strict COVID-19 policies and new worries about a property market meltdown.
On Tuesday, the euro saw its most dire session in 2 weeks as Gazprom announced that it would stop flowing gas and energy prices flew to new heights.
It stabled in Asia at $1.0145, while the Australian dollar was below at $0.6923. The Japanese yen improved at 135.96 per dollar.
The Chinese currency, the yuan, faced a struggle and property stocks dropped as investors were petrified by a potential broadening boycott of mortgage repayments on unfinished apartments reflecting around the development and banking industries.
CSI real estate index dropped 2%, and mainland developers’ Hong Kong index was down over 5%, further affected by Country Garden, a huge developer, announcing a discounted share sale.
“China’s housing sector is in the midst of a depression, and the recent mortgage boycott is a sign of the severity of the downturn,” stated Societe Generale analysts. “The extent of this boycott, as it is now, is not unmanageable, but there is a risk of escalation.”
The skyrocketing gas prices in Europe held oil in a substantial spot. Brent crude futures were stable at $104.30 per barrel, while US crude futures hiked 0.1% to $95.14 per barrel.
Gold was stable at $1,717 per ounce.