The Japan Times - Google drags down US stocks as Lagarde signals early ECB exit

Shares of Alphabet finished down more than 12 percent, resulting in around a $480 billion hit to the tech giant's market value in a bruising session.

European bourses had advanced earlier in the day, with the European Central Bank leaving interest rates unchanged after the Federal Reserve maintained US borrowing costs on Wednesday.

The euro dipped after Christine Lagarde announced she would step down as the ECB's president in February, but then rose after her press conference.

The drop in Alphabet weighed on all three major US equity indices, led by the tech-focused Nasdaq, which lost 1.4 percent.

The Alphabet slump came after it reported disappointing growth in both advertising revenue and revenue from its search business.

The company also said it would continue to increase capex spending significantly in 2027 after estimating the 2026 level as between $195 billion to $205 billion.

"I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise," Google CEO Sundar Pichai told analysts of the company's investment splurge.

But markets were unnerved by the plan.

The Alphabet report "is renewing concerns about AI investment returns, helping push the Nasdaq sharply lower," said a note from Briefing.com.

Shareholders "want clear evidence that all of this investment will eventually translate into stronger profits," Angelo Kourkafas of Edward Jones said.

But Kourkafas noted that the weakness in equities was not broad-based, with Eli Lilly and MasterCard among the companies that gained after earnings reports.

"Money is not exiting equities. It's just moving around and rotating," Kourkafas said.

Government data showed US economic growth in third quarter came in at a better than expected 3.4 percent, with authorities citing solid consumer spending as a factor.

The US Federal Reserve's preferred gauge for inflation -- the Personal Consumption Expenditures (PCE) price index -- rose by 3.6 percent year-on-year in September, an increase from the previous month.

The reports came a day after the Fed kept interest rates flat despite elevated inflation.

As expected by economists, the ECB meanwhile left its benchmark rate unchanged at 2.5 percent, after having already lifted it twice this year.

The decision came just hours after Lagarde announced she would step down early, in February 2027.

Lagarde gave little away about her next moves at Thursday's press conference, saying only she wanted to be able to speak more freely on matters outside of monetary policy.

This will stoke expectations that the former French finance minister, who served in center-right governments, could campaign in the presidential elections, although she has previously ruled out running for the presidency herself.

Eurozone inflation rose to a three-year high of 3.8 percent in September, driven by surging energy costs amid the Middle East conflict, but the ECB stressed core inflation -- excluding food and energy costs -- was under control.

"While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far," Lagarde said.

- Key figures at around 2020 GMT -

New York - Dow: DOWN 0.3 percent at 52,342.56 (close)

New York - S&P 500: DOWN 0.3 percent at 7,720.39 (close)

New York - Nasdaq Composite: DOWN 1.4 percent at 26,184.73 (close)

London - FTSE 100: UP 0.3 percent at 10,722.07 (close)

Paris - CAC 40: UP 1.1 percent at 7,970.00 (close)

Frankfurt - DAX: UP 1.3 percent at 26,039.68 (close)

Tokyo - Nikkei 225: UP 1.1 percent at 64,659.47 (close)

Seoul - Kospi: DOWN 1.2 percent at 5,937.66 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 22,958.65 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,651.43 (close)

West Texas Intermediate: DOWN 0.8 percent at $102.00 per barrel

Brent North Sea crude: DOWN 0.4 percent at $114.88 per barrel

Euro/dollar: UP at $1.1164 from $1.1154 on Wednesday

Pound/dollar: UP at $1.3365 from $1.3327

Dollar/yen: UP at 157.92 yen from 157.84 yen

Euro/pound: DOWN at 83.54 pence from 83.69 pence

H.Hayashi--JT