Global stocks slumped across the board Wednesday, following heavy selling on Wall Street, as investors retreated from expensive equity markets in the face of rising government bond yields, concerns over tech sector earnings potential and simmering geopolitical risks in commodity markets.
Europe’s Stoxx 600 benchmark, the region’s broadest measure of share prices, fell 0.48% in the opening 30 minutes of trading as benchmarks around the region noted losses of around 0.5% despite a series of solid — although not spectacular — corporate earnings and fresh M&A news.
Credit Suisse (CS) was one of the region’s outstanding early movers, rising 5.12% to Sfr17.03 each after the Swiss investment bank topped analysts’ forecasts with a 16.4% rise in first quarter net profits, the strongest in three years, even as it cautioned that “client activity levels remain sensitive” to the geopolitical and global trade tensions that are currently roiling markets.
Shire Plc (SHPG) shares were also active, rising 0.69% to 3,9567 pence each in London after it received a sweetened takeover offer from Japan’s Takeda Pharmaceuticals (TKPYY) that valued the drugmaker at around $64 billion.
U.S. equity futures were also heavy after last night’s 424 point decline for the Dow Jones Industrial Average, the biggest in three weeks, with contracts tied to the benchmark trading 44 points lower from Tuesday’s 24,024.13 close and those linked to the broader S&P 500 marked 7.5 points, or 0.28%, to the downside.
Rising corporate input costs, either in the form of higher borrowing costs or surging commodity prices, were widely cited as two triggers for last night’s selling, which spilled over into Asia markets in overnight trading, as benchmark U.S. 10-year Treasury bond yields traded past 3% for the first time in four years and Brent crude prices hit the highest levels since November 2014.
Brent crude futures contracts for June delivery, the global standard for pricing, were marked about 10 cents lower from last night’s close at $73.7 in early European trading while WTI contracts for the same month also slipped 10 cents a barrel to $67.60.
Wednesday’s session will also offer another hectic round of corporate earnings, with results from Boeing Co. (BA) , Visa (V) , Viacom, Comcast Corp. (CMCSA) , ebay (EBAY) , Northrop Grumman Corp. (NOC) and GlaxoSmithKline plc (GSK) all expected before the opening bell. Social media giant Facebook Inc. (FB) will report its first quarter earnings after the close of trading Wednesday, with the TheStreet’s tech team following all the developments live on our website.
U.S. companies are on pace to record their best slate of quarterly earnings in more than two decades as businesses capitalise on the triple cocktail of low interest rates, significant domestic stimulus and coordinated global economic growth.
Prior to Tuesday’s slate, around 80% of the 87 S&P 500 companies reporting so far this season have topped analysts’ forecasts, according to data from both Thomson Reuters I/B/E/S and FactSet, a pace that, if sustained, would be the best quarter for U.S. corporate reporting since 1994. S&P 500 companies are set to notch a 20% year-on-year rise in their collective bottom lines, as well, a figure that hasn’t been seen since the final three months of 2010.
However, stocks are also historically expensive, with the 12-month forward P/E ratio, a key metric of equity market value, trading at 16.6, well ahead of its ten year average of 14.3.