US and European stocks fall as investors turn sour on outlook

US stocks dipped in morning trade on Thursday and European shares finished lower as traders grew more doubtful over the durability of the rally in shares.

Wall Street’s benchmark S&P 500 slipped 0.5 cent, with all sectors bar consumer non-cyclicals in negative territory. The tech-heavy Nasdaq Composite also fell 0.5 per cent.

Across the Atlantic, Europe’s region-wide Stoxx 600 slid 0.2 per cent, Germany’s Dax lost 0.6 per cent and London’s FTSE 100 rose less than 0.1 per cent.

Those moves came after Tesla chief Elon Musk indicated he was prepared to sacrifice short-term profits to take greater market share. Sharp price cuts and a 4 per cent rise in the number of vehicles delivered in the first quarter failed to enthuse investors, however, dragging the company’s shares down 9.5 per cent.

Private equity group Blackstone on Thursday said it attracted $40bn in new investor capital in the first quarter, a more than 5 per cent decline from the previous three months. American Express’s first-quarter income missed expectations, while AT&T’s quarterly revenues fell short.

The S&P 500 has risen 7 per cent and Nasdaq 15 per cent this year, even as interest rates have continued to rise and three mid-sized lenders collapsed in March, sparking concerns of a looming credit crunch.

US inflation may have eased last month to its lowest level in almost two years, but analysts at Morgan Stanley said the outlook for stocks was weak because as inflation fell, “pricing power declines but inventory and other costs have already been incurred when prices were higher”.

“These challenges for earnings lead us to believe a sizeable correction is in store for US equities,” the bank said, adding that its current preference was for “high-grade bonds” over stocks.

JPMorgan’s Regional Banks index — closely watched by investors since the collapse of Silicon Valley Bank — dropped 2.5 per cent on Thursday, while the KBW bank index of larger lenders fell 2.3 per cent.

Elsewhere, new applications for US unemployment aid edged up slightly more than expected to 245,000 in the week to April 15, ahead of the 240,000 forecast by economists. A week earlier, new unemployment claims jumped to 239,000, the highest level in more than a year.

US government debt rallied, with the yield on two-year Treasuries down 0.1 percentage points to 4.15 per cent and the yield on benchmark 10-year debt down 0.07 percentage points to 3.53 per cent. The dollar index weakened 0.2 per cent against a basket of six other leading currencies.

Asian stocks were mixed, with Hong Kong’s Hang Seng index rising 0.1 per cent and China’s CSI 300 down 0.3 per cent. Japan’s Topix was steady.