European Stock Futures Fall on Earnings, Yen Rises: Markets Wrap

(Bloomberg) — European stock futures dropped as investors digested key earnings from major companies and after an unimpressive start to the results from the “Magnificent Seven” megacap technology firms.

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Asian shares and US stock futures also fell after some of corporate America’s largest businesses including Tesla Inc. and Alphabet Inc. published results were seen as insufficient to justify the recent rally in global equities. The yen gained for a third day before next week’s Bank of Japan meeting.

Deutsche Bank AG suffered its first quarterly loss in four years as trading slowed and it booked a charge tied to a legacy issue at its Postbank retail unit. On the flipside, BNP Paribas SA’s profit rose in the second quarter on surging equities trading revenue.

“The bar from investors after the runup we’ve seen in global equities year to date, investors are looking for opportunities to take some profit,” Eli Lee, chief investment strategist at Bank of Singapore Ltd., said on Bloomberg Television. “Though we think tech earnings are going to be fairly resilient over the next few weeks, we may see some volatility in equity markets.”

Alphabet retreated in US trading after the company’s chief signaled patience will be needed to see concrete results from artificial-intelligence investments. Tesla slid as much as 7% after profit missed estimates and the electric-vehicle giant delayed its Robotaxi event to October. Most shares of Tesla suppliers and electric vehicle peers in Asia also declined.

Taipei’s bourse was shut due to Typhoon Gaemi, meaning shares of tech giant Taiwan Semiconductor Manufacturing Co. didn’t trade.

The yen strengthened past 155 per dollar for the first time since early June as traders repositioned for the possibility the BOJ will raise interest rates in coming months, if not at next week’s policy meeting. Only about 30% of BOJ watchers predict the authorities will hike rates on July 31, but more than 90% say there is a risk of such a move, according to a Bloomberg survey.

The New Zealand dollar fell to the weakest level in nearly three months as lower bond yields in the nation deterred carry trade investors.

Most Chinese shares fell, extending recent losses amid economic troubles and geopolitical risks. Still, the outstanding balance of short trades on China’s stock exchanges fell to 27.9 billion yuan ($3.8 billion), the lowest in more than four years, on Monday, when China’s new measures to curb short-selling went into effect, China Securities Journal reported.

The amount of redemptions from China’s stock-focused mutual funds was one of the largest since 2005 in the second quarter, with more than half of the best-performing products seeing net selling by existing investors, according to Changjiang Securities.

Upbeat earnings on Wall Street would be a much-needed driver for equities after a bumper first half of the year. The market is facing pressure heading into a seasonally weak period, with volatility likely to be heightened by the US presidential election. In addition to the woes for Big Tech, United Parcel Service Inc. suffered its worst plunge ever on a profit miss.

Treasuries were little changed in Asia as investors awaited US debt auctions Wednesday and manufacturing PMI data. Oil rose, snapping a run of losses, after an industry report indicated that US crude inventories fell for a fourth week. Gold held an advance before key US economic data this week, that is forecast to support the case for interest-rate cuts.

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