European and US stocks mixed as traders look to central bank meetings

Lucy Harley-McKeown
Updated
In this article:

The FTSE 100 and European markets painted a mixed picture on Tuesday, as investors look to central bank meetings later in the week. Indexes in the US made modest gains before diverging as investors watch for signals from the Federal Reserve.

  • The FTSE 100 (^FTSE) was 0.2% lower by the closing bell, continuing Monday's downward trajectory.

  • The CAC (^FCHI) in Paris rose 0.3% after fresh GDP data showed the economy grew more than expected in the spring. Year-on-year GDP grew 1.1% — it was estimated to grow 0.7%.

  • The DAX (^GDAXI) in Germany rose 0.4%.

  • US stocks were mixed as investors awaited a flood of key earnings from the likes of Microsoft (MSFT) and the start of the Federal Reserve's rate-setting policy meeting.

  • The S&P 500 (^GSPC) and Nasdaq (^IXIC) were down 0.4% and 0.9% respectively, while the Dow (^DJI) rose 0.2% by the close in Europe.

  • Stocks are in the midst of a potentially pivotal week featuring the Fed's decision, the July jobs report, and results from four of the "Magnificent Seven" megacaps. All will be crucial for investors wondering whether the recent stock pullback is over, as they weigh high expectations for interest-rate cuts against concerns that Big Techs have lost their mojo.

  • Traders are also looking to meetings later in the week at the the Bank of Japan and the Bank of England for guidance on potential interest rate movement.

  • FTSE heavyweight BP (BP.L) rose as much as 2.4% in early trade, before finishing slightly lower, as its profits beat forecasts in its latest quarterly report. Current plans, based on oil and gas prices, include a share buyback of least $14bn through 2025.

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    Nvidia hobbles Nasdaq

    Chris Beauchamp, chief market analyst at online trading platform IG said:

    “The Nasdaq 100 continues to hover around 19,000, hobbled today by another lurch down for Nvidia. The next three days will likely decide the fate of the index, given the importance of the earnings due out. Weakness in US hiring figures did bolster the Dow and small caps however, maintaining some of the recent rotation trade and bolstering hopes that the Fed will cut in September.”

  • Lucy Harley-McKeown

    P&G takes a tumble

    P&G CEO Jon Moeller is seeing a more discerning US shopper, but not one completely closing their wallets.

    "Not really, I don't doubt that some shoppers are more cautious — that would make sense," Moeller told Yahoo Finance.

    Moeller says the volume of private label goods sold compared to P&G brands is "unchanged", a proxy he uses to gauge consumers trading down due to economic reasons. Unit volumes in the US have also showed growth in the past five quarters, Moeller noted.

    That more cautious shopper did appear in the company's fiscal fourth quarter reported on Tuesday, however.

    Organic sales growth of 2% fell short of consensus forecasts, as did total sales.

    READ MORE

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    How US stocks are faring at the open

  • Lucy Harley-McKeown

    Bank of England MPC preview

    FILE PHOTO: People walk near the Bank of England and the Royal Exchange, in London, Britain, July 7, 2024. REUTERS/Claudia Greco/File Photo
    FILE PHOTO: People walk near the Bank of England and the Royal Exchange, in London, Britain, July 7, 2024. REUTERS/Claudia Greco/File Photo (Reuters / Reuters)

    Money markets are narrowly betting that the Bank of England (BoE) will cut UK interest rates this Thursday, despite recent data showing sticky services inflation.

    Threadneedle Street is set to make its next decision this Thursday, with odds standing at just over 58% for a 0.25% cut, and a likelihood of a cut by September at around 90%.

    “The August decision is, perhaps, one of the toughest MPC decisions to forecast…in recent memory,” Michael Brown, senior research strategist at Pepperstone, said.

    UK interest rates are currently at 16-year record highs of 5.25% and the move would be the BoE's first interest rate cut in over four years.

    According to a Reuters poll, the majority of economists expect the monetary policy committee (MPC) to reduce interest rates at their August meeting. The survey, conducted between 18 and 24 July, showed that over 80% of economists (49 out of 60) anticipate the BoE will implement the rate cut.

    LaToya Harding has the latest: READ MORE

  • Lucy Harley-McKeown

    Stocks to watch ahead of the open: Microsoft

    Traders will be looking to Microsoft’s fiscal fourth quarter results after the US close on Tuesday evening as tech earnings are underway. Microsoft’s report follows Google parent Alphabet’s (GOOG, GOOGL) earnings announcement last week.

    Analysts tracked by FactSet expect fourth-quarter sales to rise 14.6% year-on-year to $64.4bn (£50bn) and earnings per share to increase 9.3% to $2.94. This compares to Microsoft recording $56.2bn in sales and $2.69 in earnings per share a year ago.

    The fiscal year numbers look even brighter, with analysts expecting sales to rise 15.5% to $244.8bn with earnings per share up 20.6% to $11.83.

    Cloud revenue is expected to come in at $36.8bn with Intelligent Cloud revenue, which includes Azure, set to hit $28.7bn.

    Truist’s Joel Fishbein wrote in a note: “We believe Microsoft is set to outperform across most enterprise categories, particularly Cloud, AI Services and Copilot adoption.”

    Shares of Microsoft were up 13% year to date on Tuesday.

  • Lucy Harley-McKeown

    Pound steady, but could dip at 'knife-edge' BoE meeting

    Sterling is steady today, but looking ahead to Thursday's MPC meeting, analysts at Ebury say it could trigger instability.

    Matthew Ryan, head of market strategy, said:

    “The Bank of England’s August policy announcement appears on a knife-edge, and one of the tougher rate decisions to predict for some time. We expect the MPC to deliver a 25 basis point cut on Thursday, albeit the vote on rates appears almost too close to call, and could be evenly split between the hawks and doves. On balance, we think that we’ve seen enough progress on inflation for those members that were close to voting for a cut in June to shift their allegiance in favour of the doves. There is, however, a high degree of uncertainty surrounding this view, particularly given the lack of communications from MPC members since the June meeting, in part due to the blackout period surrounding the general election.

    “In our view, the August meeting provides an ideal opportunity for the first rate reduction, as the MPC will have the luxury of the quarterly Monetary Policy Report and press conference in order to explain their decision in greater detail. Swap markets are gradually coming around to this view, and are now assigning around a 60% chance of a cut. As this is not yet fully priced in, an immediate rate reduction would likely trigger some downside in the pound, albeit an upbeat set of communications, particularly a sizeable upward revision to the GDP forecasts, could limit the extent of any sell-off.”

  • Lucy Harley-McKeown

    Eurozone GDP grew by 0.3% in the last quarter

    The pan-European STOXX 600 (^STOXX) is up this morning as GDP prints trickle in. The Eurozone's latest figures show it grew by 0.3% in the last quarter, matching Q1's growth.

    The bloc beat estimations for year-on-year growth by one percentage point, registering Q2 growth of 0.6%.

    Here's that STOXX 600 chart:

  • Lucy Harley-McKeown

    Top FTSE faller: Diageo takes a hammering

    FOTO DE ARCHIVO. Imagen referencial de vodka Smirnoff y limones en el pasillo de licores de un supermercado en Watford, al norte de Londres, Reino Unido. 8 de agosto de 2013. REUTERS/Suzanne Plunkett
    FOTO DE ARCHIVO. Imagen referencial de vodka Smirnoff y limones en el pasillo de licores de un supermercado en Watford, al norte de Londres, Reino Unido. 8 de agosto de 2013. REUTERS/Suzanne Plunkett (Reuters / Reuters)

    Diageo shares were down 10% after annual results revealed a 1.4% drop in sales and a warning that challenging conditions have continued.

    Sales declined for the first time since 2020 as the London-listed drinks firm, which owns Smirnoff and Johnnie Walker, wrestled with falling demand in Latin America and the Caribbean. It also posted a 2% dip in sales in North America.

    Unsold inventory in Mexico and Brazil led to a profit warning and a loss of market share in the United States, its biggest territory.

    Meanwhile, European sales rose 12% while in the UK they were particularly strong, with a rise in demand for Guinness of nearly a third.

    The company said: "The consumer environment continues to be challenging with conditions we saw towards the end of fiscal 24 persisting into fiscal 25.”

    RBC Capital analyst James Edwardes Jones said this was "not reassuring" given comments from other consumer companies, which have warned US consumer confidence is under pressure.

    "We expected these results to be grim, and so they were," he said.

    Analysts had expected a 4.5% fall in annual operating profit. Diageo had previously said sales in Latin America and the Caribbean would fall by between 10% and 20%.

    Overall, group net sales were also slightly worse than forecast, declining 0.6% organically.

  • Lucy Harley-McKeown

    Pastries on the up (not because of the Olympics)

    Yahoo Finance UK's LaToya Harding writes:

    Greggs was on a roll on Tuesday as summer drinks and pizza deals boosted sales. Shares surged more than 6% in London as like-for-like sales climbed 7.4% with underlying pre-tax profits hitting £74.1m for the six months to 29 June.

    The Greggs App saw participation increase to 18.3%, close to doubling last year’s 10.6%, which is expected to drive higher purchase frequency going forward due to the loyalty scheme on offer.

    The high street bakery chain added that sales were helped by new menu options, with iced drinks such as its mango and strawberry cooler and the strawberries and cream refresher now available in 500 shops, and with plans to roll out to a further 200 shops this year.

    Roisin Currie, chief executive, said: “Greggs has made good progress in the first half of the year, further broadening our range of on-the-go food and drink whilst making it more accessible to more customers.

    “Our cost outlook for 2024 remains unchanged and we continue to trade in line with our plan. The board remains confident in the long-term growth strategy, and we are investing to support that growth.”

    Greggs said it remains committed to its long-term aims to have “significantly” more than 3,000 shops across the UK, having opened 99 new shops and closed 18 to reach 2,524 in the first half.

    Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said: "Management has reiterated its outlook, with trading in line with expectations and cost inflation expected to moderate within the range of 4-5% as previously guided.

    "Greggs has unique growth opportunities and a compelling value proposition, which puts it in a strong position particularly in this tough consumer landscape."

  • Lucy Harley-McKeown

    BP lifts dividend

    Yahoo Finance UK's Pedro Goncalves reports:

    BP (BP.L) has posted profits of almost $2.8bn (£2.2bn) for the second quarter and lifted its dividend after beating profit forecasts.

    The oil and gas major posted underlying replacement cost profit, used as a proxy for net profit, of $2.8bn for the second quarter. That beat analyst expectations of $2.6bn, according to an London Stock Exchange Group-compiled consensus.

    BP made a better-than-expected half-year profit of $5.5bn, although it was down on last year’s $7.6bn amid lower profitability in its refining business.

    BP said the profit was due to “an average” performance in gas marketing and trading, lower refining margins, stronger fuels margins and “lower taxation”.

    READ MORE

  • Lucy Harley-McKeown

    German economy in decline in Q2

    Here are Germany's top line GDP figures:

    • German GDP SA (Q/Q) Q2 P: -0.1% (est 0.1%; prev 0.2%)

    • GDP NSA (Y/Y) Q2 P: 0.3% (est 0.3%; prev -0.9%)

    • GDP WDA (Y/Y) Q2 P: -0.1% (est 0.2%; prev 0.3%)

    The DAX is falling a little bit right now, but still in the green.

  • Lucy Harley-McKeown

    Shop prices steady as discounts on clothes and shoes ramp up

    Yahoo Finance UK's Pedro Goncalves reports:

    UK shop price inflation remained steady in July after a period of decline, amid concerns that economic uncertainty could push prices up again.

    Annual inflation held at 0.2%, slightly below the three-month average of 0.3% and marking the lowest rate since October 2021, according to the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.

    Food inflation decreased further, dropping from 2.5% in June to 2.3%, the lowest rate since December 2021. Fresh food prices increased by 1.4% compared to a year ago, down from 1.5% in June.

    Non-food items saw continued deflation, at 0.9% cheaper than a year ago, although this was a slight slowdown from June's 1% decrease.

    READ MORE

  • French GDP figures better than expected

    Here are the figures:

    The figures suggest the French economy was in a better condition than expected this spring before Emmanuel Macron called a snap election.

    The economy will, of course, also be getting a boost right now from inbound Olympics tourism.

    CAC futures are currently pointing to a green open for the index.

  • Lucy Harley-McKeown

    What US stocks are doing in premarket

  • Lucy Harley-McKeown

    Overnight in Asia

    Following a barnstorming day of trade on Monday, Tuesday was more subdued in Asia, with major indices heading off in different directions.

    Notably, the Hang Seng (^HSI) in Hong Kong sold off to the tune of 1.4%, with real estate and tech stocks pulling the composite down. The SSE Composite (000001.SS) also fell 0.5% as markets hold their breath ahead of key central bank decisions.

    Over in Japan, the Nikkei (^N225) rose a tentative 0.2% as attention turns to the Bank of Japan interest rate decision on Wednesday.

  • Lucy Harley-McKeown

    Overnight in the US

    From our US team:

    US stocks closed mostly flat on Monday to kick off a big week filled with a Federal Reserve rate decision, the jobs report, and Big Tech earnings.

    The Dow Jones Industrial Average (^IXIC) closed down 0.1%, coming off a surge of over 650 points for the blue-chip index on Friday. The S&P 500 (^GSPC) gained nearly 0.1% while the tech-heavy Nasdaq Composite (^IXIC) rose just above the flatline.

    Stocks kicked off the week on the front foot after surging on Friday, as investors welcomed a promising inflation reading that cemented bets for interest-rate cuts. But after a volatile run of sessions and a huge tech sell-off, the watch is on for surprises that could put the fragile rally to the test.

    No move is expected from the Federal Reserve at the end of its meeting on Wednesday, despite signs the US economy and inflation have hit a sweet spot. Many on Wall Street see other reasons for the central bank to wait until September to act.

  • Lucy Harley-McKeown

    Good morning

    Hello from London! Lucy Harley-McKeown here, ready for another day of markets news. Monday was a mixed day of trade across both Europe and the US. Today's session in Asia seems to have also produced varying results.

    This morning we had key GDP readings from the Eurozone and we're looking to the Federal Reserve's meeting and jobs data in the US later in the week.

    Let's get to it.

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