Australia

Australian shares are hinting at gains this morning following mixed results in the US. Tesla and Netflix, two of the S&P 500’s most heavily weighted stocks, dragged major indices lower following disappointing earnings reports.

ASX futures were 6 points or 0.1% higher as of 6:00am on Friday, indicating a positive open.

The Dow Jones Industrial Average rose Thursday for a ninth consecutive session, while a post-earnings selloff in Tesla shares weighed on the S&P 500 and Nasdaq Composite.

The Dow rose about 160 points, or 0.5%, to clinch its longest winning streak since September 2017. The S&P 500 declined 0.7% while the tech-heavy Nasdaq pulled back 2.1%. The Dow outperformed the Nasdaq by the widest one-day percentage-point margin since March 2021. Meanwhile, Canadian stocks fell, with the S&P/TSX Composite closing 0.2% lower.

Though the 2023 stock market rally has been broadening in recent weeks, most of this year's gains have been driven by a small group of megacap tech stocks, including Tesla. The S&P 500 and Nasdaq are weighted by market cap, so the biggest companies have a greater influence on index performance than the smallest ones. That makes the major indices vulnerable to a pullback if a few heavyweights fall.

In commodity markets, Brent crude oil inched up 0.3% to US$79.67 a barrel while gold gave up 0.4% to US$1,969.57.

Australian government bonds were higher, with the 2 Year yield rising to 3.97% and the 10 Year yield climbing to 3.95%. US Treasury notes were also higher, with the 2 Year yield increasing to 4.83% and the 10 Year yield lifting to 3.84%.

The Australian dollar edged up slightly to 67.73 US cents from its previous close of 67.69. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, leaned higher to 95.60.

Asia

Chinese shares ended lower despite Beijing signaling more support for the private sector. China on Wednesday vowed to improve conditions for businesses and treat private companies the same as state-owned enterprises. Hardware makers and software companies led the losses. Foxconn Industrial Internet dropped 7.3% and Beijing Kingsoft Office Software declined 4.4%. The property sector rose after a media report that China is considering easing home-purchasing curbs in first-tier cities. Seazen Holdings increased 1.2% and Greenland Holdings rose 0.7%. The benchmark Shanghai Composite Index ended 0.9% lower at 3169.52, the Shenzhen Composite Index declined 1.05% and the tech-heavy ChiNext Price Index was 1.0% lower.

Hong Kong's benchmark Hang Seng Index edged 0.1% lower to 18928.02, as property stocks gained but tech and consumer stocks weighed. Sentiment was down despite China announcing a 31-point plan to boost its economy, with regional markets broadly lower and US futures pointing downward. Tech and consumer-services companies led the losses. Sunny Optical slid 14% after guiding for lower 1H profit, while China Resources Power dropped 2.1%. The Hang Seng Tech Index fell 1.2% to 4063.74, while the Hang Seng Mainland Properties Index added 2.2% after a Bloomberg report said China is considering easing home-buying curbs in first-tier cities. Real estate companies Country Garden and Longfor Group were among the top gainers, rising 3.55% and 3.2% respectively.

The Nikkei Stock Average of Japan fell 1.2% to close at 32490.52, led by precision-instrument and electronics shares in a possible position adjustment ahead of Japanese CPI data due Friday morning. Another pull-ahead in inflation, particularly in the core reading, could raise the odds of pricing pressures being more ingrained before the Bank of Japan's meeting next week, noted Yeap Jun Rong, market analyst at IG, in an email. Lasertec lost 5.1%, Hoya dropped 4.2% and Advantest was down 4.2%.

Indian stocks outperformed other major Asian markets, as the benchmark Sensex index closed 0.7% higher at 67571.90. That marked the index’s sixth straight day of positive trading. Banks led the gains, as the financial sector extended its recent strength. Kotak Mahindra Bank rose 2.7%, ICICI Bank was up 2.2% and State Bank of India grew 1.4%. A mixed range of other sectors further boosted the market. Conglomerate ITC rose 2.8%, car maker Maruti Suzuki gained 1.7% and telco Bharti Airtel was up 1.5%.

Europe

European stocks rose after mostly downbeat Asia trading and ahead of an expected higher US open. The pan-European Stoxx Europe 600 advanced 0.5%, the German DAX gained 0.6% and the French CAC 40 climbed 0.8%. Mining, property and construction-related stocks were the main gainers.

"Mixed earnings from Netflix and Tesla after the bell in the US meant Asian markets were mixed once again," IG analysts wrote. "American Airlines and Johnson & Johnson earnings are on the calendar today, along with US weekly jobless claims and existing-home sales."

London’s FTSE 100 jumped 0.8% to 7646 points, supported by the mining sector amid increasing optimism on China's economic recovery, IG senior market analyst Axel Rudolph said in a note.

"While the rebound in that economy has slowed, the general improvement in global economic data has investors hoping that China's numbers will pick up again, and miners are likely to be the prime beneficiary of such a development," Rudolph explained.

Glencore closed up 4.2% and led the index's top risers, followed by Anglo American, up 3.3% after it reported robust copper production in 1H. Global investment manager M&G's shares rose 2.8%.

North America

The Dow Jones Industrial Average rose Thursday for a ninth consecutive session, while a post-earnings selloff in Tesla shares weighed on the S&P 500 and Nasdaq Composite.

The Dow rose about 160 points, or 0.5%, to clinch its longest winning streak since September 2017. The S&P 500 declined 0.7 %. The tech-heavy Nasdaq pulled back 2.1%. The Dow outperformed the Nasdaq by the widest one-day percentage-point margin since March 2021. Meanwhile, Canadian stocks fell, with the S&P/TSX Composite closing 0.2% lower.

Though the 2023 stock market rally has been broadening in recent weeks, most of this year's gains have been driven by a small group of megacap tech stocks, including Tesla. The S&P 500 and Nasdaq are weighted by market cap, so the biggest companies have a greater influence on index performance than the smallest ones. That makes the major indices vulnerable to a pullback if a few heavyweights fall.

"The danger of any market being so top-heavy is that if any of them slip, they can really drive the market south," said Eric Sterner, chief investment officer at Apollon Wealth Management.

Tesla fell 9.7% after Chief Executive Elon Musk cautioned that the electric vehicle maker might need to cut prices further. Netflix, another tech-focused stock that has climbed this year, slid 8.4% after the streamer reported revenue that fell short of its own projections, despite adding 5.9 million subscribers.

Meanwhile, Johnson & Johnson gained 6.1% after the company reported better-than-expected earnings and boosted its guidance. The stock had its best day since March 2020, lifting the S&P 500's healthcare sector and contributing more than 60 points to the 30-stock Dow.

"Investors are getting more fundamental now that we've gotten past the sentiment part of the rally and substance is required," said David Waddell, chief executive at Waddell & Associates.

Semiconductor stocks pulled back after Taiwan Semiconductor Manufacturing, the world's biggest contract chip maker, offered weaker-than-expected sales guidance for the year. The PHLX Semiconductor Sector Index dropped more than 3%. US-listed shares of Taiwan Semiconductor declined 5%, while Intel and Nvidia each shed 3%.

Shares of regional banks diverged after a fresh batch of quarterly reports. Fifth Third Bancorp and KeyCorp rose after reporting an increase in deposits from the previous quarter, while Truist Financial fell as deposits were largely flat from the quarter prior.

With about 15% of companies in the S&P 500 having reported fourth-quarter results, 74% have topped analysts' consensus earnings estimates, according to FactSet. That is below the five-year average of 77%.

The stakes get higher next week as some of the biggest tech companies in the US are set to report earnings, including Alphabet, Microsoft and Meta Platforms.

In economic data released Thursday, existing home sales decreased in June from the prior month to the slowest sales pace since January, the National Association of Realtors reported. The reading highlights the impact of the Federal Reserve's interest-rate-raising campaign on the housing market.

Fresh US jobless claims data signaled the labor market remains tight. Jobless claims, a proxy for layoffs, slipped last week, the Labor Department reported.

Investors are awaiting the Fed's policy meeting next week, where central-bank officials have signaled plans to raise interest rates by a quarter-percentage point to a 22-year high.