European stocks and US futures fall after downbeat tech earnings

European shares were poised to snap a three-day winning streak, while US stock futures fell heavily, after disappointing quarterly updates from tech groups that had thrived during the pandemic.

Europe’s Stoxx 600 share index dropped 0.3 per cent in opening trades. Contracts that wager on the direction of Wall Street’s technology-heavy Nasdaq 100 fell 1.8 per cent. Japan’s Nikkei 225 fell 1.1 per cent, with most other Asian markets closed for the lunar new year holiday.

Overnight, Facebook owner Meta shed almost $200bn of its value, after reporting its first ever decline in daily active users, warning of increased competition from rivals such as ByteDance’s TikTok platform and citing macroeconomic issues such as supply chain disruptions.

Shares in online payments group PayPal also dropped a quarter on Wednesday after it warned inflation and a weakening ecommerce environment would slow its growth rate this year. Music streaming platform Spotify, meanwhile, delivered a weak outlook for first-quarter subscriber growth.

Investors have been jittery about the highly valued tech companies that have dominated Wall Street’s main equity indices for months, fearful of slowing growth as coronavirus social restrictions end, as well as impending US interest rate rises that reduce the appeal of more speculative and early stage businesses.

The Nasdaq 100 has fallen more than 7 per cent so far this year, despite having risen in the past four sessions as traders focused on forecast-beating quarterly results from Apple, Microsoft and Google owner Alphabet.

“We knew heading into this print that ecommerce was challenged,” JPMorgan trading desk executive Ron Adler said in a note to clients, referring to Meta’s and Paypal’s results. “And that will weigh on the entire [tech] complex.”

Government debt markets were steady on Thursday morning ahead of monetary policy statements from the Bank of England and the European Central Bank.

The yield on the benchmark 10-year US Treasury note was flat at 1.77 per cent, Germany’s equivalent Bund yield was steady at 0.04 per cent and the 10-year UK gilt yield traded at 1.26 per cent. Bond yields, which track interest rate and inflation expectations, move inversely to debt prices.

After the US Federal Reserve last month opened the door to a rapid cycle of rate rises to tackle surging inflation, the BoE is widely expected to raise borrowing costs for the second time in two meetings.

Traders are intensely focused on whether the ECB, whose president Christine Lagarde has insisted the bank will not raise its main deposit rate above zero this year, will make a statement that is interpreted as dangerously dovish.

“Our concern is the market challenging the ECB in their resolve, to say it is too dovish and behind the curve,” said Tatjana Greil Castro, co-head of public markets at credit investor Muzinich & Co.

Greil Castro said that in practice this could lead to a sell-off of eurozone debt as investors bet on the ECB leaving monetary loose for too long and then embarking on rapid rate rises that might destabilise the currency bloc’s weaker economies.

Eurozone inflation hit a new record high of 5.1 per cent in January. The yield on Italy’s 10-year bond rose 0.03 per cent on Thursday to 1.45 per cent as the price of the debt fell.