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Weak Earnings, Trade Tensions Weigh on Global Stocks

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07/18/2019 | 09:15am EDT

By Lauren Almeida and Anna Isaac

Equities fell around the world Thursday as another snag in U.S.-China trade talks and weak earnings shook investor confidence.

In U.S. offhours trading, shares in Netflix fell 11% after the streaming giant said its number of subscribers in the U.S. declined for the first time in nearly a decade. Ebay rose 5.7% after the online marketplace raised its profit outlook and notched better-than-expected quarterly results. Meanwhile, Qualcomm dropped 0.9% after the European Union announced a second antitrust fine against the telecommunications giant.

Futures tied to the Dow Jones Industrial Average slipped 0.1%, a day after U.S. stocks fell as the start of earnings season exposed weaknesses in the growth outlook for some companies. Microsoft is set to report second-quarter results later Thursday.

In Europe, the benchmark Stoxx Europe 600 index was almost flat, with declines in the technology and energy sectors offset by gains in health care. Shares in SAP dropped 6.9% after the German business-software maker reported disappointing second-quarter results. Nordea Bank fell 5.7% after the Helsinki-based lender reported a 39% drop in profit.

Novartis led pharmaceutical stocks higher with a 4.5% jump after the Swiss drugmaker raised its full-year forecast for the second time this year.

While the European economy is doing well, "it's more about downside risk coming from trade wars combined with the everlasting Brexit risk," said Jorge Garyao, global head of inflation strategy at Société Générale. The trade tensions that are currently focused on U.S.-China "could easily move into the eurozone," he said.

The U.K.'s FTSE 100 index continued to trade down 0.5% after the government spending watchdog, the Office for Budget Responsibility, warned of a recession lasting at least a year if Britain quits the European Union without a deal. The report said that a no-deal Brexit could cause the U.K. economy to shrink 2.1%.

In Asia, the Shanghai Composite Index fell 1%. Progress toward a trade deal has stalled while the Trump administration determines how to address Beijing's demands that it ease restrictions on Huawei Technologies, people familiar with the talks said. No face-to-face meetings have taken place or been scheduled since President Trump and President Xi Jinping of China met last month in Japan and agreed to resume talks.

"Markets don't seem to be taking the comments on trade tensions very well," said Fritz Louw, a currency analyst for Mitsubishi UFJ Financial Group. He added that investors are likely to see several days of volatility as they await progress in talks between China and the U.S.

The Nikkei 225 gauge dropped nearly 2% after Japan's exports tumbled for the seventh straight month in June, hit by a sharp drop in shipments of chip-making tools and automobile parts to China.

The yield on the 10-year Treasury fell to 2.071% from 2.102% on Wednesday, according to data from Factset. Yields fall when bond prices rise. The WSJ Dollar Index, which measures the currency against a basket of peers, was down 0.07%.

--Caitlin Ostroff contributed to this article.

Write to Lauren Almeida at lauren.almeida@wsj.com and Anna Isaac at anna.isaac@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 0.28% 2823.82 End-of-day quote.13.05%
DJ INDUSTRIAL 1.20% 25886.01 Delayed Quote.10.97%
EBAY INC. 1.47% 40.02 Delayed Quote.40.51%
EURO / BRITISH POUND (EUR/GBP) -0.60% 0.9128 Delayed Quote.2.19%
EURO / US DOLLAR (EUR/USD) -0.14% 1.109 Delayed Quote.-3.10%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
MICROSOFT CORPORATION 1.83% 136.13 Delayed Quote.31.61%
MITSUBISHI CORP 0.40% 2605.5 End-of-day quote.-12.10%
MITSUBISHI UFJ FINANCIAL GROUP INC -0.04% 498.8 End-of-day quote.-5.51%
NASDAQ 100 1.59% 7604.108768 Delayed Quote.20.13%
NASDAQ COMP. 1.67% 7895.993811 Delayed Quote.19.00%
NETFLIX 2.38% 302.8 Delayed Quote.13.13%
NIKKEI 225 0.06% 20418.81 Real-time Quote.2.02%
NORDEA BANK ABP 3.04% 59.37 Delayed Quote.-20.39%
NOVARTIS 1.23% 87.52 Delayed Quote.17.81%
QUALCOMM 2.98% 73.28 Delayed Quote.25.04%
S&P 500 1.44% 2888.68 Delayed Quote.13.59%
SAMPO 0.74% 36.78 Delayed Quote.-4.24%
SAP AG 1.48% 107.3 Delayed Quote.23.43%
STOXX EUROPE 600 1.24% 369.63 Delayed Quote.9.47%
STOXX EUROPE 600 NR 1.25% 794.04 Delayed Quote.12.20%
US DOLLAR INDEX 0.00% 98.142 End-of-day quote.1.51%
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