Shares were lower on Thursday as investors became wary that rising inflation would curb corporate profits following cautionary remarks about demand from electric car maker Tesla.
Futures contracts for the US benchmark S&P 500 and Nasdaq 100 fell 0.2 percent and 0.5 percent in pre-market trading, putting further pressure on indices in Europe.
The regional Stoxx 600 fell 0.6 percent, while the FTSE 100 and the German Dax index lost 0.2 percent and 0.5 percent, respectively.
In Asia, Hong Kong’s Hang Seng Index fell 1.8 percent to its lowest level in more than 13 years after the city’s leader, John Lee, announced measures to attract international companies to Hong Kong, but the did not remove restrictions on inbound travel or social distancing.
Tesla CEO Elon Musk said demand was strong as he discussed the company’s third-quarter earnings. However, he warned that deflationary forces in the economy were gaining momentum, with China and Europe going through “a kind of recession.” Shares of Tesla, one of the world’s largest companies by market capitalization, fell 5.8 percent in pre-market trading.
The declines in Europe and Asia came after declines in US equities in the previous session, as consumer whistleblower firms reported on Wednesday about the effects of inflation on third-quarter earnings.
Investors have been watching the corporate earnings season closely, looking for signs that inflation is hitting activity and consumer confidence. On Wednesday, consumer goods groups Nestlé and Procter & Gamble reported declining sales volumes, and Nestlé chief executive Mark Schneider warned of higher prices.
Central banks, including the US Federal Reserve, have aggressively raised interest rates this year to contain rising prices. The speed and magnitude of the increases have raised concerns that central banks will push the global economy into an economic downturn.
“The honeymoon rally of the past few days watered down yesterday. . . as investors turned their attention back to central banks and how quickly they will raise interest rates,” wrote Jim Reid, a strategist at Deutsche Bank.
Investors will look for further clues about the health of the US economy when groups such as American Airlines and cigarette maker Philip Morris International report on Thursday.
In foreign exchange markets, the yen briefly traded above ¥150 against the dollar, a new low in 32 years.
The Bank of Japan’s ultra-flexible approach to monetary policy and contrasting interest rate hikes from other global central banks has seen the Japanese currency fall more than 20 percent this year. The dollar fell 0.1 percent against a basket of six counterparts, and the pound fell 0.2 percent against the dollar.
Elsewhere, UK government bonds recovered from previous losses on Thursday, with 10-year government bond yields falling 0.02 percentage points to 3.85 percent as the asset’s price rose. Thirty-year government bond yields also fell 0.09 percentage points to 3.90 percent, having also fallen in the previous session after the Bank of England decided to exclude long-term debt when it starts selling bonds next month. .