European stocks edged lower on Monday as investors remained cautious over the outlook for the global economy following a spate of cautious corporate earnings reports.
The regional Stoxx Europe 600 gave up initial gains to fall 0.1 per cent in early trading, pulled lower by energy and consumer goods stocks. London’s FTSE 100 lost 0.1 per cent.
Contracts tracking Wall Street’s benchmark S&P 500 fell 0.6 per cent, while those tracking the tech-heavy Nasdaq 100 lost 0.9 per cent in thin trading.
Both indices finished higher on Friday, registering back-to-back weekly gains for the first time since August as companies including Amazon, Facebook owner Meta and Alphabet disappointed investors with their third-quarter results and forward guidance.
John Butters, senior earnings analyst at FactSet, said S&P 500 companies have so far reported earnings 2.2 per cent above estimates. That would mark the lowest earnings growth rate reported by the index since the third quarter of 2020. The energy sector is reporting earnings growth of 134 per cent, however.
Investors have been watching the latest corporate earnings season for signs of strain from high inflation and rising borrowing costs. Companies including Pfizer, Airbnb and Uber report on Tuesday.
The fears overshadowed widely anticipated policy meetings at the Bank of England and the US Federal Reserve this week.
The Fed is due to implement its fourth straight 0.75 percentage point rate rise on Wednesday and signal further increases to come in an effort to curb rapid price growth.
The central bank’s preferred inflation metric, the core personal consumption expenditures index, last week rose 0.5 per cent month on month for September, in line with economists’ expectations and down from 0.6 per cent in August.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the latest inflation figures meant it was “too early” for the Fed to follow the Bank of Canada or the European Central Bank in issuing “less hawkish signals”.
The Bank of England is also expected to raise borrowing costs by 0.75 percentage points on Thursday, at its first meeting since previous chancellor Kwasi Kwarteng’s disastrous “mini” Budget of unfunded tax cuts.
Elsewhere in equity markets, Japan’s Topix gained 1.6 per cent and South Korea’s Kospi added 1.1 per cent. Hong Kong’s Hang Seng index fell 0.8 per cent, while China’s CSI 300 lost 0.9 per cent.
In government bond markets, the yield on the 10-year US Treasury note added 0.02 percentage points to 4.03 per cent as its price fell. The yield on the 10-year German Bund also rose 0.02 percentage points to 2.1 per cent.