Morning Deal: China Spends, Watching Europe Borrows

Tom Westbrook’s view of the day ahead in European and global markets:

Reports on tech and luxury goods giants are mixed. Microsoft (MSFT.O) and Google parent Alphabet (GOOGL.O) beat forecasts, but their stock prices moved in opposite directions as investors focused on cloud computing.

Google shares fell 6% in after-hours trading. Microsoft shares rose 4% and Nasdaq 100 futures fell 0.3% in Asia.

Here’s a summary of the pair’s results.

Meta (META.O), the parent of Facebook, reports on the secondary market on Wednesday. The company’s shares fell on Tuesday, and hours later, dozens of US states sued the company and its Instagram, accusing them of addicting teenagers.

On the luxury side, Kering (PRTP.PA), owner of the Gucci and Balenciaga brands, reported a larger-than-expected decline in sales in the third quarter. That’s worse than the slowdown reported by LVMH (LVMH.PA) and the surprise sales surge reported Tuesday by Birkin bag maker Hermes (HRMS.PA), which pushed its shares up 3%.

The revamped Gucci creation, presented last month in Milan by designer Sabato De Sarno, has not yet hit stores.

Credit data in Europe and the economic climate survey in Germany will be closely watched later on Wednesday. Santander (SAN.MC), Deutsche Bank (DBKGn.DE) and Dassault Systemes (DAST.PA) also report results.

In Asia, China’s plans to raise a trillion yuan ($137 billion) in sovereign debt boosted Chinese stocks in anticipation of spending and lifted MSCI’s broad index of Asian shares outside Japan from Tuesday’s 11-month low.

Central Huijin’s vow to buy exchange-traded funds and continue to do so also echoes similar sovereign fund announcements that sparked strong gains in 2013 and 2015.

The main driving force in the currency market was the Australian dollar, which gained after surprisingly good inflation data prompted investors to reassess the risk of another interest rate hike.

Just this week, RBA Governor Michele Bullock said the bank would not hesitate to raise its interest rate to 4.1% if there was a “material” upward revision to the inflation outlook.

Key events that may impact markets on Wednesday:

Economics: Loans in the euro zone, survey of enterprises in Germany

Profits: Dassault Systemes, Deutsche Bank, CME Group, Hilton, Boeing and post-market IBM and Meta

($1 = 7.3118 Chinese yuan)

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