European markets close lower with Fed in focus; Credit Suisse slips 4%

Keith Barr, CEO at IHG, discusses the company's results, the removal of Chinese Covid restrictions, and employment trends in the hospitality and leisure industry.

All major U.S. indexes fell on Tuesday morning.

The Dow Jones Industrial Average dropped 264 points, or 0.78%. The S&P 500 and Nasdaq Composite declined by 0.8% and 0.9%, respectively.

— Hakyung Kim

The U.K. composite Purchasing Managers' Index returned to growth in February after six months of declines.

Both manufacturing and services output increased in the survey, though the latter was stronger.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a note that the figures "indicate encouraging resilience of the economy" despite headwinds such as higher interest rates, the cost of living crisis , labor shortages and strikes.

"However, while the data suggest that near-term recession odds have fallen considerably, elevated inflation pressures clearly remain a concern, especially in the service sector," he said.

"As such, the resilience of the economy and the stickiness of the survey's inflation gauges add to the likelihood of the Bank of England tightening policy further, and potentially more aggressively, which may dampen future growth expectations and suggests that the possibility of recession later in the year should not be ruled out."

— Jenni Reid

Freddie Lait, managing partner and portfolio manager at Latitude Investment, says U.S. banks are unlikely to be hit hard even in a recession scenario thanks to their "well capitalized" balance sheets. JP Morgan and Goldman Sachs are among the top 10 holdings in Lait's fund.

British medical equipment manufacturer Smith & Nephew was the top performer on the Stoxx 600 in late morning trade, up 5.2%

The company reported slightly higher revenue but a drop in operating profit from $936 million to $901 million for 2022. It also said it had seen strong revenue growth in the fourth quarter and was making good progress on its plans for revenue growth of 5-6% and a trading profit margin of at least 17.5% next year.

Credit Suisse remained at the bottom of the index, down 6.2% on reports that it is being reviewed by the Swiss financial regulator for comments made by its chairman.

— Jenni Reid

Shares of Credit Suisse fell almost 5% in early trade on Tuesday, briefly touching a record low, after Reuters reported that the Swiss financial regulator is reviewing comments from Chairman Axel Lehmann about the lender's outflows stabilizing in early December.

Lehmann and other Credit Suisse representatives told media outlets in December that client withdrawals had "flattened out" and begun to reverse, and regulator Finma is reportedly exploring whether the statements were potentially misleading.

In its results on Feb. 9, Credit Suisse confirmed that net outflows hit 110.5 billion Swiss francs ($119.5 billion) in the fourth quarter of 2022.

— Elliot Smith

The U.K.'s pound jumped against the dollar Tuesday, following news that the country's government posted a surprise surplus in January.

Sterling was 0.47% higher against the dollar at 10:10 a.m. London time.

— Katrina Bishop

The U.K.'s public sector spent less than it received in income in January, the U.K.'s Office for National Statistics said Tuesday, surprising economists.

Public sector net borrowing in the U.K. was in surplus for the month, coming in at £5.4 billion ($6.4 billion). That's £5 billion more than expected by the independent Office for Budget Responsibility. Economists polled by Reuters, meanwhile, had expected borrowing of £7.85 billion.

The public purse got a boost from self-assessed tax receipts, which came in at £21.9 billion in January — the largest figure for the month since records began, the U.K.'s Office for National Statistics said Tuesday.

"January's high annual self-assessed tax receipts were partly offset by substantial spending on energy support schemes and large one-off payments relating to historic customs duties owed to the EU," the ONS noted.

Read more here.

— Katrina Bishop

High-yielding stocks are back in the spotlight as volatility persists, inflation remains hot and Treasury yields continue to rise.

Data released last week showed that U.S. consumer inflation rose by 0.5% in January and was up 6.4% from a year ago — a larger-than-expected increase. Several Fed speakers hinted at further interest rate hikes after the data was released.

"Inflation that is 'too high' according to a rash of hawkish speakers, alluding to not only more hikes being needed, but requiring rates to be elevated for a more prolonged period, means that a hawkish Fed is not a 'breeze drifting on by,'" said Vishnu Varathan, head of economics and strategy at Mizuho Bank, in a Monday note. He also flagged that Treasury yields have risen materially since early February.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Composite Purchasing Managers' Index figures for France and Germany returned to growth in February for the first time in months.

The French gauge of private sector business activity was positive for the first time since last October, though growth was modest.

Meanwhile, German PMI was positive for the first time in eight months.

However, in both cases, overall growth was achieved thanks to strength in services, with manufacturing PMI falling.

— Jenni Reid

Europe's Stoxx 600 index was down 0.3% shortly after the open, with most sectors in the red.

Financial services fell 0.9%, mining stocks fell 0.75% and construction stocks were down 0.5%.

All major bourses posted declines, as the U.K.'s FTSE 100 fell 0.3% back below the 8,000 level it breached for the first time last week.

— Jenni Reid

Investors are on edge after U.S. stocks fell for three consecutive weeks, signaling the possibility of higher interest rates for longer than expected.

The yield on the 6-month and 1-year Treasury bonds closed at 5% on Friday, thanks to several economic data releases last week that pointed toward a strong U.S. economy.

A rise in bond yields leads to increased borrowing costs for companies, which adds downward pressure on stocks.

Despite this challenging environment, Goldman Sachs remains optimistic and expects a "soft-landing" for the U.S. economy. In this scenario, inflation is controlled with a mild recession at most.

To capture the upside in a soft-landing scenario, the Wall Street bank said that investors should own stocks that can benefit from a decelerating inflation environment.

CNBC Pro subscribers can read more here.

— Ganesh Rao

It has been quite a start to the year for both Nvidia and Taiwan Semiconductor Manufacturing Company.

Both stocks have rallied in 2023, with shares of Nvidia soaring nearly 50% so far this year — an outperformance that's impressive even amid a broader market rally. TSMC's performance has been more muted in comparison, but it has still gained 14% this year.

But the sentiment surrounding companies is decidedly different.

Warren Buffett's Berkshire Hathaway has dumped most of its stake in TSMC, just months after buying the Taiwanese chipmaker's stock. The sale, disclosed in fourth-quarter 13F filings last week, comprised roughly 86% of Berkshire's stake in TSMC.

Meanwhile, investor interest in Nvidia has surged as it becomes seen as a way to play the growing hype around artificial intelligence.

CNBC Pro subscribers can read more here.

— Zavier Ong