European stocks fall on earnings as dollar fluctuates amid GDP

Bloomberg.- European stocks fell for a fifth day as companies reported disappointing results while a gauge of the dollar strength swung between gains and losses after a report on U.S. economic growth.

The Stoxx Europe 600 Index headed for its longest losing streak in six weeks after Anheuser-Busch InBev NV posted a surprise drop in profit and Novo Nordisk A/S, the world’s biggest maker of insulin, cut its long-term growth target. The Bloomberg Dollar Spot Index was little changed even after a report showed growth picked up in the third quarter. German bunds were little changed following a selloff this week spurred by speculation the European Central Bank along with other global policy makers will rein in stimulus. Aluminum rose to a 15-month high after a rally in iron ore prices in China.

“The guidance has been a bit disappointing,” said Daniel Murray, head of research at EFG Asset Management in London. “Sentiment has been damaged by the fact that we are in the U.S. election period and the fact that expectations with respect to the ECB are coalescing around the fact that it’s going to be less expansive than it has been this year.”

A rally in global equities is pulling back in October and bonds worldwide are on course for their worst month since the taper tantrum of 2013 amid growing concern central banks will step back from ultra-easy monetary policies while the Fed moves closer to raising interest rates as the economy improves. Gross domestic product increased more than forecast in the while consumer spending rose less than projected, data showed on Friday.

Stocks

The Stoxx 600 fell 0.4 percent at 8:45 a.m. in New York, after sliding as much as 1 percent. The gauge has lost 1.1 percent this week. While most industry groups retreated in the past five days, banks climbed and lost their spot as the year’s biggest losers, thanks to better-than-forecast reports at Spanish firms such as Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA.

In the U.S., futures on the S&P 500 Index edged higher, with the gauge heading for its third weekly decline in four. Contracts on the Nasdaq 100 Index added 0.2 percent on Friday.

Among companies moving on earnings:

– AB InBev lost 4.3 percent after cutting its revenue projection.
– Novo Nordisk sank 16 percent after slashing its long-term target for earnings growth by half.
– Software company Gemalto NV tumbled 10 percent as its revenue missed estimates.
– Amazon.com Inc. lost 4.4 percent in early New York trading after forecasting holiday sales that may miss projections.
– Alphabet Inc. added 2 percent after reporting revenue and profit that topped projections.
– Sanofi rallied 7 percent after the drugmaker raised its profit forecast.
– British Airways owner IAG SA, which reported a decline in quarterly earnings amid a weaker pound, climbed 5.3 percent as its annual profit forecast was in line with analysts’ estimates.

While almost 80 percent of the S&P 500 companies that have reported earnings so far have beaten estimates, the looming presidential election and prospects for higher interest rates have hurt shares. The S&P 500 fell for the past three days, its longest losing streak since early September.

Bonds

German benchmark 10-year securities were little changed, with yields near the highest in almost six months. The annual consumer-price inflation rate in four German regions, including Saxony and Brandenburg, rose in October, according to reports released before data for the nation is made available later Friday.

“The premise of the selloff so far was higher inflation and uncertainty on what the ECB is going to do next and particularly about how the next leg of quantitative easing would look,” said Peter Chatwell, head of rates strategy at Mizuho International Plc in London. “These conditions remain in place, so it’s difficult to envisage markets finding strong support until there is much stronger conviction as to the ECB.”

German 10-year bund yields were at 0.18 on Friday, after reaching 0.22 percent, the highest since May 5. The yield has climbed 30 basis points this month.

The yield on 10-year U.S. Treasuries was little changed at 1.86 percent, leaving it up 26 basis points this month.

U.S. GDP rose an annual 2.9 percent, the most in two years, followinga 1.4 percent gain the prior quarter, Commerce Department data showed Friday. The median forecast in a Bloomberg survey called for 2.6 percent growth. Consumer spending, the biggest part of the economy, rose a less-than-projected 2.1 percent.

Fixed-income assets are retreating as fund managers boost cash holdings before the presidential vote Nov. 8 and as monetary policies show signs of turning less accommodative in the U.S., Europe and Japan. The Bank of Japan shifted to targeting bond levels from its goal to push yields lower, while ECB officials have said the authority will probably gradually wind down its bond purchases.

Bonds have lost 2.9 percent in October, according to the Bloomberg Barclays Global Aggregate Index.

The cost of insuring non-investment grade corporate bonds against default rose for the fourth day in a row. The Markit iTraxx Europe Crossover Index of credit-default swaps climbed five basis points to 330 basis points, putting it on track for the biggest weekly increase in six. The investment-grade Markit iTraxx Europe Index rose one basis point to 73 basis points. It’s set for the largest weekly advance this month.

Currencies

The Bloomberg Dollar Spot Index advanced less than 0.1 percent after falling 0.1 percent. The gauge is headed for a 2.5 percent gain this month, the most since May. The probability of a Fed rate hike this year climbed 8 percentage points this week to 76 percent in the futures market.

Sweden’s krona rebounded from the lowest level since 2010 against the euro on Thursday, having slumped after the central bank signaled it’s prepared to extend bond purchases into next year.

The yuan held near a six-year low amid speculation that China’s policy makers are becoming more tolerant of declines as exports slump and the dollar advances. It’s dropped 1.5 percent in October, set for its biggest monthly loss since an August 2015 devaluation.

Bitcoin surged 8.4 percent this week to about $684, the biggest increase since June, as yuan declines spurred demand for the cryptocurrency. China accounts for about 90 percent of trading in bitcoins as the digital tender offers its citizens a means to hedge against yuan depreciation amid capital controls.

Commodities

Oil was set for the first weekly drop since September as an OPEC committee meets in Vienna on Friday to discuss output quotas for members participating in an agreement to cut production. Saudi Arabia and its Gulf allies are willing to cut 4 percent from their peak production, Reuters reported, citing people familiar with the matter.

Iron ore is rallying as coal prices surge, with futures in China heading for the longest run of daily gains since 2013 and contracts in Singapore poised for a third weekly climb. The stronger prices helped to lift shares of producers in Australia, the world’s largest shipper.

Aluminum climbed as much as 0.6 percent in London and has gained more than 10 percent since last Friday’s close in Shanghai, its biggest weekly advance. Zinc reached a fresh five-year high and iron ore climbed a seventh day.

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