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HomeWorld NewsShares to fall on weak earnings, Yields at 4.24%

Shares to fall on weak earnings, Yields at 4.24%

McDonalds down 7%, US GDP revised to 2.8%

Shares in S&P futures fall on weak earnings, McDonald’s -7%. U.S. GDP revised up to 2.8% in 2024, Treasury yields hit 4.24%.

United States Shares

The U.S. economy continues to outperform expectations, with the International Monetary Fund (IMF) revising U.S. GDP growth forecasts for 2024 and 2025 upwards. The 2024 growth rate is now expected at 2.8%, an increase of 0.2 percentage points, while 2025 growth is forecasted at 2.2%, up 0.3 points. This marks a cumulative upward revision of 0.7 points for 2024 and 0.5 points for 2025 since January. U.S. Treasury yields have surged as a result, with the 10-year yield hitting 4.24%, a 25 basis point rise in a week, driven by strong economic data and upcoming elections. The U.S. budget deficit currently sits at 6.4% of GDP.

U.S. futures for the S&P 500 and Dow Jones Industrial Average dropped by 0.2% and 0.5%, respectively, on Wednesday, following weak corporate earnings. McDonald’s shares fell 7% due to an E. coli outbreak linked to its Quarter Pounder hamburgers. Starbucks shares dropped 4.7% after a disappointing quarterly earnings report. Meanwhile, Boeing’s shares were unchanged ahead of a pivotal third-quarter report.

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Corporate Earnings

Corporate earnings were a key focus, with major U.S. companies such as Tesla, Boeing, and IBM reporting their quarterly results. Tesla shares were down premarket, while Coca-Cola exceeded revenue expectations due to higher pricing, despite lower sales volumes.

Europe Shares

In Europe, concerns over a sluggish economy and rising borrowing costs weighed on stock markets. Germany’s DAX and the UK’s FTSE 100 were down 0.4%, while France’s CAC 40 dropped 0.8%. Deutsche Bank shares declined 3% despite reporting a profit, as the bank raised its loan-loss provisions. The European Central Bank (ECB) has started debating whether to lower interest rates to stimulate the economy, with rates possibly falling below the neutral estimate of 2-2.5%. The euro weakened to $1.0779, as lower rate expectations in Europe contrast sharply with the U.S.

Asian Shares

Japan’s benchmark Nikkei 225 fell 0.8% to 38,104.86, as the yen weakened past 152 per U.S. dollar for the first time since July. Japan’s 40-year government bond yields reached a 16-year high amid rising global yields. Tokyo Metro Co.’s shares surged 45% in its debut after raising $2.3 billion in the country’s largest IPO since 2018.

In China, the shares rallied for a second day after the central bank cut key lending rates, with the Hang Seng index rising 1.3% and the Shanghai Composite up 0.5%. The Chinese government is considering issuing 2 trillion yuan ($281 billion) in special bonds to stabilize financial markets.

Oil and Commodities

Crude oil prices fell on Wednesday, with U.S. West Texas Intermediate (WTI) down 1.9% to $70.31 per barrel and Brent crude declining to $74.61 per barrel. The drop followed signals of a rise in U.S. oil inventories and continued geopolitical uncertainty in the Middle East.

Currencies and Bonds

The U.S. dollar continued its rally, rising to 152.79 yen and pushing the euro down to $1.0779. The Bloomberg Dollar Spot Index gained 0.4%. In the bond markets, the U.S. 10-year Treasury yield rose to 4.23%, while Germany’s 10-year yield slipped by one basis point to 2.31%. Britain’s 10-year yield increased by three basis points to 4.20%.

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