Equities on hold as traders await Fed decision

Stocks paused their gains amid a flurry of corporate news and earnings with traders adopting a cautious stance before the Federal Reserve’s policy decision on Wednesday.

Europe’s benchmark Stoxx 600 posted small moves as car makers Volkswagen AG, Mercedes-Benz Group AG and Stellantis NV retreated, offsetting better-than-expected economic data from France and Spain. HSBC Holdings Plc climbed more than 2% after solid earnings and the surprise departure of Group Chief Executive Officer Noel Quinn. Big retail names are also due to report, with earnings from Amazon.com Inc., McDonald’s Corp and Coca-Cola Co. 

Early results from the US reporting season suggest that more than 80% of companies are beating expectations, helping offset fears rates will stay higher for longer. Fed Chair Jerome Powell is unlikely to ease those concerns on Wednesday amid hot inflation data and signs of strength in the US economy, according to Bloomberg Economics.

The Bloomberg Dollar Spot Index rose 0.3% while 10-year Treasury yields were steady at 4.62%. S&P 500 futures were little changed. 

Corporate Highlights: 

• Volkswagen AG’s first-quarter earnings fell after waning car sales and the cost of introducing new models weighed on profitability.
• Mercedes-Benz Group AG’s earnings plummeted 34% in the first quarter, weighed down by model changes and sluggish demand for electric vehicles.
• Elon Musk is planning hundreds more job cuts across Tesla Inc. as two more senior executives leave the company, according to the Information. Rebecca Tinucci, senior director of the Supercharger group, and Daniel Ho, head of new products, will no longer work at Tesla from Tuesday, according to the report, which cited an internal company memo.
• Deutsche Lufthansa AG said it will initiate a cost-cutting drive at the namesake airline business that includes freezing projects and review hiring in some areas
• Adidas AG reported increased profitability in the first quarter, boosted by demand for sneakers like the Samba and inventories that are coming down to healthier levels.
• Stellantis NV’s first-quarter sales slumped 12%, led by declines in the US where the changeover to the revamped Ram 1500 cut into sales with the carmaker forecasting new models to drive growth later in the year.
• Carlsberg A/S said it would start a new quarterly share buyback program after first quarter sales and beer volumes grew, boosted by its performance in Asia.

In Asia, Samsung Electronics Co. rose as much as 2.4% in Seoul trading after its semiconductor business returned to profitability for the first time since 2022. Equity gauges climbed in Japan and Hong Kong, and Chinese onshore stocks fluctuated following data showing an expansion in the nation’s factory activity for a second month.

The Japanese yen traded 0.4% weaker against the dollar at 156.92. On Monday, the currency surged back from its weakest level against the greenback in 34 years amid suspicion the government intervened.   

Elsewhere, oil held its biggest drop in almost two weeks as discussions on a possible cease-fire in the Middle East reduced the risk premium for crude. Gold is set to gain for a third straight month ahead of this week’s Fed meeting.

Key events this week:

• Eurozone CPI, GDP, Tuesday
• US employment cost index, Conf. Board consumer confidence, Tuesday
• Amazon, Samsung, HSBC earnings, Tuesday
• Labour Day holiday across much of Europe, Wednesday
• Treasury’s quarterly refunding announcement, Wednesday
• US ADP employment change, JOLTS job openings, ISM Manufacturing, Wednesday
• Federal Reserve rate decision, Wednesday
• Eurozone S&P Global Manufacturing PMI, Thursday
• US factory orders, initial jobless claims, trade, Thursday
• Apple earnings, Thursday
• Eurozone unemployment, Friday
• US unemployment, nonfarm payrolls, ISM Services, Friday
• Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:36 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.7%
• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.1% to $1.0705
• The Japanese yen fell 0.3% to 156.86 per dollar
• The offshore yuan fell 0.1% to 7.2535 per dollar
• The British pound fell 0.2% to $1.2536

Cryptocurrencies

• Bitcoin rose 0.6% to $63,348.63
• Ether fell 0.3% to $3,166.56

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.62%
• Germany’s 10-year yield was little changed at 2.54%
• Britain’s 10-year yield was little changed at 4.29%

Commodities

• Brent crude rose 0.1% to $88.50 a barrel
• Spot gold fell 0.8% to $2,316.96 an ounce

This story was produced with the assistance of Bloomberg Automation.

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