LONDON: World stock markets fell on Friday as a rash of disappointing company results triggered profit-taking ahead of the weekend, capping a record-breaking run for equities.

The dollar took a hit from US GDP data which cast further doubt on any early interest rate increase from the Federal Reserve.

Wall Street was soft approaching midday in New York, with sentiment undermined by retail giant Amazon severely undershooting profit estimates.

Other major fallers following earnings reports were ExxonMobil and Starbucks.

“The US indices have had a powerful run recently, and it’s not at all surprising that we have seen a relatively small retreat from the record highs,” said David Madden, market analyst at CMC Markets UK.

Political uncertainty after another failed attempt at healthcare reform in the US also weighed on confidence, dealers said.

Dollar down

US GDP growth at 2.6 percent in the second quarter, meanwhile, offered little support to the “beleaguered” dollar, FXTM research analyst Lukman Otunuga said.

“Although US GDP printed in line with expectations, price action suggests that concerns over stubbornly low inflation in the US, as well as political risk, continue to weigh heavily on the dollar,” he said, adding a further fall “may be on the cards”.

The mood also soured in Europe, where shares in Renault tumbled on a weak outlook for the French carmaker despite surging sales and record profits in the first half of 2017.

In Frankfurt, BMW, Daimler and Volkswagen shares also fell. The three were this week hit with lawsuits over their alleged collusion to drive up the prices of their cars.

London’s benchmark FTSE 100 index was down one percent at the closing bell, weighed down by poor results from troubled telecoms and television firm BT Group.

“The FTSE sell-off has intensified into the close, with the blue chip benchmark hitting its lowest level in over two weeks,” noted Josh Mahoney at IG.

BT shares slid after the group posted a 42 percent slump in first-quarter profits, rocked by fresh fallout from an Italian accounting scandal.

Barclays shares fell as the bank reported a first-half net loss of 1.21 billion.

Tobacco smoked

Tobacco stocks plunged after the US Food and Drug Administration said it may push companies to cut nicotine levels in cigarettes to non-addictive levels.

This will “blow a hole in their earnings”, said Neil Wilson, senior market analyst at ETX Capital in London.

“One to light up a sleepy Friday afternoon. Shares in tobacco stocks were crushed,” he said British American Tobacco fell more than seven percent, while Imperial Brands dropped nearly five percent.

Mike van Dulken, at Accendo Markets, however, said that the reaction may have been overdone.

“It might not sound great, but it doesn’t read like the industry is destined to go up in smoke,” he said.

The FDA said in a statement that it plans “to begin a public dialogue about lowering nicotine levels in combustible cigarettes to non-addictive levels through achievable product standards”.

Swiss relief

The Swiss franc fell further against the euro, continuing a week-long slide that has been welcome news to Swiss companies suffering from the currency’s recent strength.

International investors often use the Swiss franc as a safe haven currency in times of uncertainty, punishing exporters such as Swiss watchmakers whose products become more expensive to buy in foreign markets.

The Swiss central bank sometimes sells francs to ease the pain, but not this time, said Florian Weber, a strategist at J. Safra Sarasin, citing instead stronger economic data in the eurozone.

Analysts at Morgan Stanley said global investors had recently developed a strong appetite for riskier assets, such as stocks, which created “an ideal environment” for the franc to pull back.

Published in Dawn, July 29th, 2017