Stocks Slump as Tesla and LVMH Earnings Disappoint: Markets Wrap

(Bloomberg) — Stocks slumped on lackluster results from Tesla Inc., LVMH and Deutsche Bank AG, fueling concern about the health of global business as the reporting season kicks into overdrive. Nasdaq 100 index futures sank 1%.

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LVMH tumbled 6.5% after sales in China plummeted during the quarter, adding evidence that an economic slowdown is hurting European companies. Deutsche Bank dropped on its first quarterly loss in four years and scrapped plans for a buyback. Tesla shares fell 7% in New York premarket trading after a fourth straight quarter of disappointing earnings.

Analysts are poring over this week’s raft of earnings as they hunt for signs that the tech-driven rally of the first half of the year has longer to run. The market is facing pressure into the summer months, with volatility also likely to be heightened by uncertainty as the US presidential race gathers pace.

“Mixed earnings, alongside softening activity data and high political uncertainty keep markets on edge,” said Emmanuel Cau, head of European equity strategy at Barclays. “Added to that, we are entering the tricky summer seasonality, so investors are turning more defensive in their portfolio.”

The euro slipped and bonds extended gains after European data showed private-sector activity barely grew this month, with statistics for Germany pointing to a contraction. Yields on Treasuries edged lower as investors awaited US debt auctions and manufacturing PMI data.

So far, about a fifth of S&P 500 companies have reported results. Analyst estimates slid ahead of the season as they usually do, but market strategists including Morgan Stanley’s Michael Wilson and Barclays’ Cau have warned that the downgrades have been milder on this occasion, setting the bar for positive surprises higher. Investors appear particularly worried about sales, with less than half of companies beating expectations.

Hopes for the so-called Magnificent Seven — comprising Tesla, Alphabet, Apple Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp. — are lofty. Analysts project profits at these companies to have jumped 30% in the second quarter, compared with a 10% increase for the S&P 500 as a whole, according to data compiled by Bloomberg Intelligence.

LVMH, Deutsche Bank

In Europe, LVMH shares dropped to a six-month low after a disappointing set of results signaled that even the strongest brands are succumbing to a slowdown in demand for high-end items. Analysts flagged a hit from currency movements as well as weakness in China.

Deutsche Bank lost 7%. Germany’s largest lender said trading slowed and that it would most likely refrain from conducting a second share buyback this year, after a €1.3 billion ($1.4 billion) litigation provision tied to its Postbank retail unit.

In Asia, most shares of Tesla suppliers and electric vehicle peers also declined. Taipei’s bourse was shut due to Typhoon Gaemi, meaning shares of tech giant Taiwan Semiconductor Manufacturing Co. didn’t trade.

The Japanese yen strengthened past 155 per dollar for the first time since early June as traders repositioned for the possibility the central bank will raise interest rates in coming months, if not at next week’s policy meeting.

Oil rose, snapping a run of losses, after an industry report indicated that US crude inventories fell for a fourth week.

Key events this week:

Canada rate decision, Wednesday
US new home sales, S&P Global PMI, Wednesday
IBM, Deutsche Bank earnings, Wednesday
Germany IFO business climate, Thursday
US GDP, initial jobless claims, durable goods, Thursday
US personal income, PCE, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.7% as of 10:15 a.m. London time
S&P 500 futures fell 0.7%
Nasdaq 100 futures fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.5%
The MSCI Asia Pacific Index fell 0.4%
The MSCI Emerging Markets Index fell 0.3%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0835
The Japanese yen rose 0.5% to 154.83 per dollar
The offshore yuan was little changed at 7.2900 per dollar
The British pound fell 0.1% to $1.2895

Cryptocurrencies

Bitcoin rose 0.7% to $66,339.23
Ether fell 0.8% to $3,456.13

Bonds

The yield on 10-year Treasuries declined two basis points to 4.23%
Germany’s 10-year yield declined one basis point to 2.43%
Britain’s 10-year yield was little changed at 4.13%

Commodities

Brent crude rose 0.8% to $81.64 a barrel
Spot gold rose 0.1% to $2,412.10 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma.