European stocks fall on earnings as bond rout eases

London - European stocks fell for a fifth day as companies reported disappointing results while a bond rout abated and metals rallied.

The Stoxx Europe 600 Index headed for its longest losing streak in six weeks after Anheuser-Busch InBev (AB InBev) posted a surprise drop in profit and Novo Nordisk, the world’s biggest maker of insulin, cut its long-term growth target.

German bunds were little changed following a selloff this week spurred by speculation the European Central Bank (ECB) along with other global policy makers will rein in stimulus.

A gauge of dollar strength was near a seven-month high before the US reports gross domestic product. Aluminium rose to a 15-month high after a rally in iron ore prices in China.

"The guidance has been a bit disappointing," said Daniel Murray, head of research at EFG Asset Management in London.

"Sentiment has been damaged by the fact that we are in the US election period and the fact that expectations with respect to the ECB are coalescing around the fact that it’s going to be less expensive than it has been this year."

A rally in global equities is pulling back in October and bonds worldwide are on course for their worst month since the taper tantrum of 2013 amid growing concern central banks will step back from ultra-easy monetary policies while the Fed moves closer to raising interest rates as the economy improves.

US GDP growth quickened in the third quarter, economists in a Bloomberg survey said before a report on Friday.

Stocks

The Stoxx 600 fell 0.4% at 7:29 in New York, after sliding as much as 1%. The gauge has lost 1.1% this week. While most industry groups retreated in the past five days, banks climbed and lost their spot as the year’s biggest losers, thanks to better-than-forecast reports at Spanish firms such as Banco Santander and Banco Bilbao Vizcaya Argentaria.

In the US, futures on the S&P 500 Index were little changed, with the gauge heading for its third weekly decline in four. Contracts on the Nasdaq 100 Index dropped less than 0.1% on Friday.

Among companies moving on earnings:

AB InBev lost 4.3% after cutting its revenue projection. Novo Nordisk sank 16% after slashing its long-term target for earnings growth by half. Software company Gemalto tumbled 10% as its revenue missed estimates.

Amazon.com lost 4.4% in early New York trading after forecasting holiday sales that may miss projections.

Alphabet added 2% after reporting revenue and profit that topped projections. Sanofi rallied 7% after the drug maker raised its profit forecast.

British Airways owner IAG, which reported a decline in quarterly earnings amid a weaker pound, climbed 5.3% as its annual profit forecast was in line with analysts’ estimates.

While almost 80% of the S&P 500 companies that have reported earnings so far have beaten estimates, the looming presidential election and prospects for higher interest rates have hurt shares.

The S&P 500 fell for the past three days, its longest losing streak since early September. Exxon Mobil, Chevron and MasterCard are among companies reporting on Friday.

Bonds

German benchmark 10-year securities were little changed, with yields near the highest in almost six months. The annual consumer-price inflation rate in four German regions, including Saxony and Brandenburg, rose in October, according to reports released before data for the nation is made available later on Friday.

"The premise of the selloff so far was higher inflation and uncertainty on what the ECB is going to do next and particularly about how the next leg of quantitative easing would look," said Peter Chatwell, head of rates strategy at Mizuho International in London.

"These conditions remain in place, so it’s difficult to envisage markets finding strong support until there is much stronger conviction as to the ECB."

German 10-year bund yields were at 0.18 on Friday, after reaching 0.22%, the highest since May 5. The yield has climbed 30 basis points this month.

The yield on 10-year US Treasuries was little changed at 1.86%, leaving it up 26 basis points this month.

Fixed-income assets are retreating as fund managers boost cash holdings before the presidential vote November 8 and as monetary policies show signs of turning less accommodative in the US, Europe and Japan.

The Bank of Japan shifted to targeting bond levels from its goal to push yields lower, while ECB officials have said the authority will probably gradually wind down its bond purchases.

Bonds have lost 2.9% in October, according to the Bloomberg Barclays Global Aggregate Index.

The cost of insuring non-investment grade corporate bonds against default rose for the fourth day in a row.

The Markit iTraxx Europe Crossover Index of credit-default swaps climbed five basis points to 330 basis points, putting it on track for the biggest weekly increase in six.

The investment-grade Markit iTraxx Europe Index rose one basis point to 73 basis points. It’s set for the largest weekly advance this month.

Currencies

The Bloomberg Dollar Spot Index was little changed, heading for a 2.5% gain this month, the most since May. The probability of a Fed rate hike this year climbed 5 percentage points this week to 73% in the futures market.

Sweden’s krona rebounded from the lowest level since 2010 against the euro on Thursday, having slumped after the central bank signalled it’s prepared to extend bond purchases into next year.

The yuan held near a six-year low amid speculation that China’s policy makers are becoming more tolerant of declines as exports slump and the dollar advances. It dropped 1.5% in October, set for its biggest monthly loss since an August 2015 devaluation.

Bitcoin surged 8.4% this week to about $684, the biggest increase since June, as yuan declines spurred demand for the cryptocurrency.

China accounts for about 90% of trading in bitcoins as the digital tender offers its citizens a means to hedge against yuan depreciation amid capital controls.

Commodities

Oil was set for the first weekly drop since September as members of the Organisation of the Petroleum Exporting Countries' committee meets in Vienna on Friday to discuss output quotas for members participating in an agreement to cut production.

Saudi Arabia and its Gulf allies are willing to cut 4% from their peak production, Reuters reported, citing people familiar with the matter.

Iron ore is rallying as coal prices surge, with futures in China heading for the longest run of daily gains since 2013 and contracts in Singapore poised for a third weekly climb. The stronger prices helped to lift shares of producers in Australia, the world’s largest shipper.

Aluminium climbed as much as 0.6% in London and has gained more than 10% since last Friday’s close in Shanghai, its biggest weekly advance. Zinc reached a fresh five-year high and iron ore climbed a seventh day.