Profit-taking hits US stocks, Europe shrugs off recession

US markets were hit by a bout of profit-taking on Friday, while in Europe investors largely shrugged off data confirming the eurozone is back in recession.

Weaker-than-expected Chinese numbers also dented sentiment, with Asia’s main equity indices closing out the week lower.

Wall Street had powered to fresh highs Thursday on news US growth had accelerated more than six percent in the first quarter and jobless claims continued to fall to new pandemic-era lows.

US indices are benefitting also from outsized earnings this week from tech heavyweights Apple, Facebook and Google.

A bit of profit-taking appeared to be setting in on Friday in the rally which has driven Wall Street’s main share indices to all-time highs in recent weeks.

Earnings and growth news have been “so good that more people are finding it hard to believe it can last,” said Briefing.com analyst Patrick O’Hare.

“That last thought is the essence of the ‘peak growth’ narrative that is emerging as a more forceful headwind for the bull market,” he said.

“You can of course advance into a headwind, only it takes more effort and time to do so.”

European stocks were mixed despite data showing the eurozone economy fell into a second recession in less than a year in the first quarter, as slow vaccinations and pandemic lockdowns stopped a rebound.

Germany was the major drag on growth in the January to March period, with exports unable to overcome a steep drop in demand by confined consumers, analysts said.

Nevertheless, Frankfurt stocks rose modestly in afternoon trading.

“The economic recovery was always likely to be uneven in nature, and this morning’s growth figures highlighted exactly that,” said IG analyst Josh Mahony, noting that confinement measures pushed Germany into a contraction while France grew modestly.

“However, the story of a lagging EU could soon start to shift, with the region expecting to ramp up their vaccinations to fully cover 70 percent of the population by mid-July,” he added.

Adding to the selling pressure was a report showing slowing growth in China’s factory activity owing to a global shortage of shipping containers, supply chain problems and rising freight rates.

Observers nevertheless remain upbeat about the outlook, as vast sums of government and central bank cash swirl around the world economy.

“All evidence still points to continued support from both fiscal and monetary policy against a backdrop of accelerating corporate earnings,” Mark Haefele, at UBS Global Wealth Management, said.

“This reinforces our view that markets can advance further, with cyclical parts of the market — such as financials, energy, and value stocks — likely to benefit most from the global upswing.”

Shares in Apple shed 0.8 percent as trading opened in New York after the EU formally accused Apple on Friday of unfairly squeezing out music streaming rivals through its App Store in one of the biggest-ever competition cases to hit the iPhone maker.

In currency trading, the dollar was higher against the euro.

Oil prices slid on profit-taking.

– Key figures around 1330 GMT –
London – FTSE 100: UP 0.3 percent at 6,982.19 points

Frankfurt – DAX 30: UP 0.4 percent at 15,206.92

Paris – CAC 40: DOWN less than 0.1 percent at 6,297.41

EURO STOXX 50: DOWN 0.2 percent at 3,990.99

New York – Dow: DOWN 0.4 percent at 33,910.21

Tokyo – Nikkei 225: DOWN 0.8 percent at 28,812.63 (close)

Hong Kong – Hang Seng Index: DOWN 2.0 percent at 28,724.88 (close)

Shanghai – Composite: DOWN 0.8 percent at 3,446.86 (close)

Euro/dollar: DOWN at $1.2086 from $1.2118 at 2130 GMT

Pound/dollar: DOWN at $1.3875 from $1.3940

Euro/pound: UP at 87.10 pence from 86.91 pence

Dollar/yen: DOWN at 108.91 yen from 108.92 yen

Brent North Sea crude: DOWN 1.8 percent at $67.31 per barrel

West Texas Intermediate: DOWN 2.2 percent at $63.59 per barrel