Wall Street decline reflected on European and Asian stock markets

Asian stock markets were mixed at the beginning of a new trading day. Tokyo and Sydney contracted, whereas Hong Kong and Seoul saw gains. 

Asian markets have seen short-term volatility. According to Janet Tsang, investment specialist at Morgan Asset Management, it is a result of investors balancing the impact of higher interest rates with growing optimism that limited demand will boost earnings. 

The Shanghai Composite Index hiked by 0.4% to 3,491.35. Meanwhile, the Nikkei 225 in Tokyo shrank by 2.1% to 29,052.11. The Hang Seng in Hong Kong started the day lower but gained 0.2% at 29,173.25 at midday.

The Kospi in Seoul rose by 0.5% to 3,214.99. At the same time, the S&P-ASX 200 in Sydney dropped by 0.7% to 7,019.20.

Oxygen rally in the Indian stock market is enough to lift shares

As for India’sIndia’s Sensex, it opened with increases of 0.5% at 48,208.06.

Shares in companies that produce oxygen are rallying. In the middle of the second wave of the deadly coronavirus infection, patients struggle to find medical oxygen. 

In April, companies like Bombay Oxygen, National Oxygen Ltd, and Bhagawati Oxygen Ltd, which are not even listed on any primary stock index, have surged by 47%. All these happened when India’s broader market has fallen by 2%.

Rusmik Oza, senior vice-president at Kotak Securities in Mumbai, believes that once the coronavirus cases start going down and oxygen supplies increase, the prices will come to normal levels. At the same time, the stocks should go back to earlier levels. 

Elsewhere, New Zealand, Singapore, and Jakarta dropped, while Bangkok advanced.

Wall Street corrects earlier increases

The main North American stock indexes closed down in the main correction session. Investors are waiting for more quarterly results from major companies. Besides, they have an eye on the 10-year debt auction on Wednesday. Yields on Treasury bonds have gone up again.

The Dow Jones closed with losses of 0.36% to settle at 34,077.63 points after setting a new high at 34,256.75 points on Friday.

Chipmaker Intel dropped by 1.7%, Capital One lost 0.9%, and Valero Energy plunged by 2.3%.

S&P 500 declined by 0.53%, to 4,163.27 points. In Friday’s intraday trading, it had set a new record at 4,191.31 points.

For its part, the technological Nasdaq Composite contracted by 0.98% to 13,914.76 points. The Nasdaq was the most pressured index due to the increase in interest rates on the US 10-year debt, which worsened to 1.591%. They came to trade yesterday at 1.617%, a level well above the multi-week low reached on April 15 at 1.528%.

The rise in interest rates on sovereign debt has put pressure on the quoted companies in the technological sector. It reduced the appetite for high-growth stocks in favor of companies that are seen as more likely to perform well with the economic recovery. 

Tesla sank by 3.4% after two people were killed in Texas in a crash of one of its models. According to authorities, there was nobody in the driver’s seat at the moment of the crash.

Investors are eyeing the 10-year Treasury bond auction that will take place on Wednesday.

On the earnings side, GameStop stood out, which ended up adding 6.39% to $164.37. The gains came after the announcement that the CEO, George Sherman, will leave the company at the end of July – or earlier.

IBM breaks its streak of declines and rises by 4%

Shares of IBM shot up as much as 4% after the market closed on Monday. The technology and business services maker reported first-quarter earnings that were better than analysts expected. Following these results, the company has broken a streak of declines in its revenues in the previous four quarters. 

The computer company earned $1.77 per share, compared to the $1.63 per share that analysts anticipated. They rose to $17.73 billion in terms of revenue compared to the expected $17.350 million.

According to the company’s statement, during the quarter, its revenue grew 0.9% on an annualized basis. By contrast, it saw a 6% decline in the previous quarter. 

IBM’s Global Technology Services segment, which handles managed services, outsourcing, and support, contributed $6.37 billion in revenue. Its revenue was down 1% year-over-year but exceeded the FactSet estimate of $6.32 billion. IBM plans to spin off part of the segment as an independent public company called Kyndryl by the end of the year.

IBM’s cloud and cognitive software division, which includes Red Hat, posted revenue of $5.44 billion. It was 4% more than the FactSet forecast of $5.3 billion. IBM reported $529 million in capital expenditures in the quarter, a decrease of 28%.

Global Business Services, the unit that includes consulting, contributed $4.23 billion in revenue. It is an increase of 2%, which exceeded the anticipated figures of $4.03 billion.

Systems revenue of $1.43 billion from the sale of mainframes and other hardware increased by 4%. Again, the gain exceeded the estimated $1.29 billion.

EuroStoxx 50 to lose psychological 4,000 points

Regarding the European stock markets, they started the day in the negatives. Declines were moderate initially; however, they have been widening until turning tinted red in the middle of the session. 

In most cases, the slump was a result of the downward turn of Wall Street futures. 

This Tuesday, the EuroStoxx 50 sales are assumed to fall below the psychological level of 4,000 points.

Thursday’s ECB meeting, the calm before the storm?

The European Central Bank is holding a new monetary policy meeting this week from which nearly nothing is expected. The eyes of the market will be on the statements of Christine Lagarde, president of the ECB, looking for the slightest clue about the future of stimulus in the eurozone. This could be the last quiet meeting within the central bank before a new dispute begins. Economic recovery and inflation, which is good news for the economy, may become a new object of controversy among the central bank members.

Megatrends in investment

Adapting to the relevant megatrends and selecting companies with the highest degree of purity is very important when identifying the best companies through active management. 

The Business Development team at Allianz Global Investors identified four megatrends in investment. These are resource scarcity, urbanization, demographic and social changes, and technological innovation. They allow us to have a diversified, global, and unrestricted portfolio. 

The investment spectrum is global. It affects developed and emerging markets. Besides, there is important private capital to invest in and public capital through governments, such as the new Biden Administration in the US, the EU Green deal, and the five-year plan by the Chinese authorities. They are putting infrastructure on the central axis of their investments for the coming years. 

Biotechnology is becoming a very reasonable investment topic

In its thirty years of life, the biotechnology sector has attracted more than $300 billion in capital. The belief that biotech can change medicine was the basis of the investment. 

Romualdo Trancho, a member of the Business Development team, stated that the health sector is crucial. The team is viewing biotechnology in a positive light. Now it is being used to develop coronavirus vaccines. That’s why biotechnology is becoming a perfect investment theme.