GLOBAL MARKETS-Stocks fall as supply woes hit earnings, rate concerns

On Oct 28, 2021

* Global stock prices off record peak

* Yield curve flattens sharply as short yields rise

* BoC suggests early rate hike, RBA stirs bond market

* European stocks seen little changed

By Hideyuki Sano

TOKYO, Oct 28 (Reuters) – Global stocks eased from record peaks as corporate earnings reports served as a stark reminder of current supply chain challenges, while investors also looked to upcoming central bank meetings to gauge whether policy tightening could come earlier.

MSCI’s gauge of world stocks, ACWI, dipped 0.05% in Asia, with Japan’s Nikkei leading losses with a fall of 0.9%.

Mainland Chinese shares slipped 0.3%, while MSCI’s broadest index of Asia-Pacific shares outside Japan ticked down 0.25%.

European stocks are expected to open flat, with Euro Stoxx futures and Britain’s FTSE futures little changed on the day.

Overnight on Wall Street, the S&P 500 lost 0.51% from an all-time high of 4,574.79 hit on Tuesday, while the Nasdaq closed the session little changed, thanks to strong earnings from Microsoft and Google parent Alphabet .

But other earnings reports showed the largest U.S. manufacturers including General Motors, General Electric , 3M and Boeing are facing logistics headaches and higher costs due to global supply bottlenecks that are likely to persist into next year.

GM lost 5.4% following their earnings release on Wednesday.

In Asia, Japan’s robot maker Fanuc tumbled 7.8% while IT conglomerate Fujitsu shed 8.4% as their earning showed a bigger than expected impact from a global chips shortages.

South Korea’s tech giant Samsung Electronics rose 3% after bumper profits but said it expects component shortages to affect chip demand from some customers in the final three months of the year.

“The working assumption in the market has been that the impact of a chip shortage will fade by the end of year. But if it remains a problem next year, investors will surely feel less confident about the outlook,” said Masayuki Murata, general manager of balanced portfolio investment at Sumitomo Life Insurance.

With global supply disruption fuelling worries about inflation, investors are keeping close eye on whether major central banks will look to reduce their generous pandemic stimulus measures more quickly.

The Bank of Canada ended its quantitative easing sooner than expected and signalled on Wednesday that it could hike interest rates earlier than previously thought, as soon as April 2022.

The Reserve Bank of Australia skipped a chance to buy a government bond that is the linchpin of its yield curve control policy, sending yields soaring above target.

The yield on the country’s April 2024 bond jumped above 0.5%, well above the policy target of 0.1%, with interest rate futures pricing in a rate hike as soon as May.

Investors also suspect the U.S. Federal Reserve could move faster towards rate hikes, with Fed funds rate futures pricing in two rate hikes by end-2022.

The Fed is expected to announce tapering of its bond purchase at its policy meeting next…