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Hong Kong - Asian stocks retreated from a four-month high and European shares declined after companies including Sony and Microsoft reported earnings that missed estimates.
The yen weakened as Bank of Japan weighs the possibility of offering negative-rate loans to banks.
Raw-materials producers led declines on the MSCI Asia Pacific Index, while more than four shares fell for every one that rose on the Stoxx Europe 600 Index.
The Shanghai Composite Index had its steepest weekly loss since January, while Japan’s Topix climbed to a two-month high as the yen weakened versus all 31 major peers. Russia’s ruble strengthened as US crude rose toward $44 a barrel.
American companies’ results for the first quarter have mostly beaten projections so far, helping drive an equities rally that this week pushed a gauge of global shares to the highest level since early December.
Google parent Alphabet and Microsoft on Thursday dimmed the picture somewhat as their earnings fell short of analysts’ forecasts, while Sony reported an annual profit that was 9% less than it predicted in January. Rallies this year in haven assets including precious metals and the yen are a sign investors remain cautious.
“There’s been scant evidence of sustained earnings growth,” said Matthew Sherwood, head of investment strategy at Perpetual in Sydney, which manages about $21bn.
“It’s too soon to declare that the earnings recession is over in all regions - things look better in the US, but central-bank policy in Europe and Japan appears increasingly deflationary and the prospect for strong economic recovery in emerging markets is still hard to fathom.”
Daimler announced on Friday that its first-quarter operating profit fell 8.5%, while Swedish truckmaker Volvo AB reported a 3% decline.
READ: Daimler first quarter profits dips on E-class relaunch costs
McDonald’s, General Electric and Caterpillar Inc. are among US firms scheduled to release earnings. Finance ministers and central bankers from the eurozone will meet for talks in Amsterdam, after the European Central Bank (ECB) on Thursday refrained from adding to the unprecedented stimulus it introduced in March.
Stocks
The Stoxx Europe 600 Index was 0.6% lower as of 09:20. Daimler slid 4.5%, while Volvo gained 3.3%. Futures on the Standard & Poor’s 500 Index gained 0.1% after the benchmark dropped by the most in two weeks.
The MSCI Asia Pacific Index fell 0.5%, paring its weekly gain to 1%. Australia’s S&P/ASX 200 Index slipped 0.7% and Hong Kong’s Hang Seng Index lost 0.9%. The Shanghai Composite Index lost almost 4% this week, reflecting concern that improving economic data will prevent further stimulus and corporate defaults will rise.
The Topix rallied 1%, reversing an earlier loss of as much as 1%. Banking stocks led gains among the benchmark’s 30 industry groups, with Mitsubishi UFJ Financial Group surging 6.6% and Sumitomo Mitsui Financial Group rising 4.4%.
Having adopted a negative interest rate on some excess reserves to penalize financial institutions for leaving money idle, the Bank of Japan may consider helping them lend by offering a negative rate on some loans, people familiar with the matter told Bloomberg. The monetary authority is expected to loosen monetary policy further at a review next week, according to 23 of 41 economists surveyed by Bloomberg.
Sony slumped 1.7% after the company scaled back expected demand for the sensors and lenses that go into cameras as well as smartphones. The company is assessing the impact of this month’s earthquake in Japan for earnings in the current year. Microsoft and Alphabet declined in after-hours US trading.
Currencies
The possibility of another negative interest-rate in Japan weakened the yen, which slumped 1% versus the greenback.
“We thought they would be doing more quantitative easing but it looks like they may be doing more on the negative-interest-rate front,” said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia. That’s driving the move lower in the Japanese currency and “if delivered, you’ll get a temporary but significant spike up in dollar-yen,” he said.
The euro was little changed before euro-area finance ministers and central bankers meet Friday in Amsterdam. It jumped as much as 0.9% in the last session and subsequently erased the gain as the ECB’s policy statement and President Mario Draghi’s news conference struggled to convince investors that unprecedented stimulus will jump-start growth in the region after years of failing to do so.
The ruble strengthened 1.2%, poised for a fourth weekly gain, as higher crude prices brightened prospects for Russia. South Korea’s won fell 0.9%, wiping out the bulk of this week’s advance, as the possibility of an interest-rate cut in South Korea leaves the currency vulnerable.
"There’s a risk the Fed might sound a bit more hawkish to prepare the market for a rate hike in June,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore in the city-state. “Under that scenario the room for the won to further rally may be limited."
Commodities
Oil rose 1.8% to $43.96 a barrel, after falling Thursday from the highest level in almost five months amid rising US crude stockpiles and speculation producers will be unable to agree on an output freeze. It’s risen in all but one of the past 10 weeks, including a jump of more than 8% over the past five days.
Gold was headed for a 0.9% weekly gain, while silver climbed to an 11-month high. The latter jumped more than 5% for the second week in a row, having entered a bull market on Tuesday.
Bonds
The yield on 10-year US Treasuries was little changed at 1.86%, about 10 basis points higher than at the end of last week. The yield on similar-maturity Australian government debt increased on Friday by four basis points to 2.64%.
The yield on Japan’s 40-year bonds fell to a record 0.27%.
