On Wednesday, European and American stock markets suffered a broad decline, with the S&P 500 and Nasdaq falling to near two-month lows. Tesla and Google's parent company Alphabet reported earnings that fell short of expectations, triggering market concerns about the sustainability of technology and artificial intelligence prospects. Louis Vuitton Moët Hennessy (LVMH) became another European luxury goods giant to release lackluster financial reports. Macroeconomic uncertainties also disturbed the commodity markets, with crude oil hitting a six-week low during trading, and industrial metals copper and aluminum falling into a bear market, leading to a rise in safe-haven sentiment.

US and European earnings season alarms sound

The two US technology giants that first disclosed their performance have disappointed investors who had high hopes.

Tesla's stock price plummeted by more than 12% on Wednesday, with a market value loss exceeding $80 billion. Hit by falling car prices and restructuring costs, the electric vehicle manufacturer's second-quarter profits missed expectations and reported the lowest profit margins since 2019. Alphabet, Google's parent company, saw its stock price drop by 5%, with its YouTube advertising business growth slowing down, while capital expenditure in artificial intelligence continued to increase at a high rate.

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D.A. Davidson stated in a client report that the latest earnings of Tesla and Alphabet have intensified investors' concerns about the dominant position of large technology stocks, which have repeatedly pushed the US stock market to historical records over the past two years.

At the same time, the Philadelphia Semiconductor Index plummeted by nearly 5% that day, with stocks like Broadcom, Qualcomm, NVIDIA, and TSMC falling together. Next, the market focus will shift to the performance of Apple, Meta (Facebook's parent company), and Microsoft in the coming week.

Charles Schwab believes that the latest performance of technology giants may lead to an external review of the health of corporate spending on technology. Over the past few weeks, institutions have started to downgrade some technology companies' ratings, and the external expectations for artificial intelligence mean that stock price reactions will be more intense. Therefore, considering the uncertainties in the technology sector, the market's volatility risk may not have been fully released.

In Europe, LVMH has become another fashion brand to warn of a slowdown in future business. The world's largest luxury goods group said that sales growth has slowed as consumers control their spending. In the first half of the year, sales revenue decreased by 1% to €41.7 billion, and net profit decreased by 14% to €7.267 billion.

Affected by this, the European luxury goods sector weakened, with Kering Group and LVMH falling by more than 4%, and Hermès and Pernod Ricard falling by 2.4% and 1.8%, respectively. British luxury fashion brand Burberry's stock price in London fell by 2.1%.

Earlier this month, Hugo Boss's performance forecast showed that second-quarter sales fell by 1% to €1.02 billion, and earnings before interest and taxes (EBIT) fell by 42%, to €70 million. The company's CEO, Daniel Grieder, said in a statement: "We are in a period of severe global macroeconomic uncertainty, which has also affected our second-quarter performance."Burberry previously decided to cancel its quarterly dividend, lowered its profit forecast, and will replace its CEO. Jonathan Akeroyd reached an agreement with the board to resign, to be succeeded by former Michael Kors CEO Joshua Schulman, who will become the British fashion company's fourth CEO in 10 years. Over the past 12 months, the company's share price has fallen by more than 50%.

Regarding recent market volatility, Steve Clayton, head of equity funds at Hargreaves Lansdown, said: "The mid-term earnings season has begun on both sides of the Atlantic, and so far, investors are not satisfied with what they see."

Commodities continue to be lackluster

Macroeconomic uncertainty has also sparked concerns. The Eurozone composite PMI fell sharply from 50.9 in June to 50.1, just a step away from the boom-or-bust line. Among the region's two major economies, Germany fell back into the contraction zone after four months, and the French economy, dragged down by the sluggish manufacturing sector, moved further away from the expansion line. This also confirmed the European Central Bank's previous judgment. Last week, the ECB's decision statement lowered the economic growth outlook and predicted that inflation would continue to decline.

Troubled by low demand expectations, commodities continue to be under pressure. International crude oil futures hit a new low since mid-June on Wednesday, with US oil falling below the $77 mark during trading. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said that the expectation that OPEC will start lifting its production restrictions in the fourth quarter, and the increasing likelihood that Trump, once in office, will further increase US production, has made the concern of oversupply dominant.

US copper futures for September delivery on the New York Mercantile Exchange fell 1.2%, closing at $4.11 per barrel, marking the eighth consecutive trading day of decline, the longest losing streak since February 3, 2020. Copper prices have fallen 20.5% from their historical high in May, entering a technical bear market along with aluminum.

First Financial Daily previously reported that multiple factors have caused the reversal of the "global economic barometer." First, copper inventories registered at the world's three major exchanges exceed 500,000 tons. Second, there is no sign of stabilization in global manufacturing. Third, the US election also poses a significant challenge to many demand scenarios. The growing long-term demand in the new energy industry and electric vehicles has been a reason for investors to enter the market. However, as the Republican presidential candidate Trump maintains a lead in the polls, the support policies of the Democratic government may be completely reversed.

Carsten Fritsch, a commodities analyst at Commerzbank, believes that cyclical commodities are facing a generally negative investor sentiment, and the market is waiting for more certain signals of recovery on the consumption side.

The market theme will continue to revolve around the US presidential election, expectations of interest rate cuts, and the earnings season. The US GDP data and the Personal Consumption Expenditure Price Index (PCE) to be released in the next two days, Beijing time, may affect the outlook for monetary policy and risk appetite. The FedWatch tool of the Chicago Mercantile Exchange shows that the probability of a rate cut in September is as high as 95%, with more than 60 basis points expected to be cut throughout the year.