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Stocks slump as Snap cracks rally, July ECB hike looms

Nasdaq futures lost 2 percent, with traders blaming an earnings warning from Snap which saw shares in the Snapchat owner tumble 28 percent, while S&P 500 futures slipped 1.25 percent.

May 24, 2022 / 03:14 PM IST

Shares slid worldwide on Tuesday as disappointing company earnings and fears about slowing global economic growth punctured the mini-rally of the last few trading days.

Nasdaq futures lost 2 percent, with traders blaming an earnings warning from Snap which saw shares in the Snapchat owner tumble 28 percent, while S&P 500 futures slipped 1.25 percent.

That followed a 1.2 percent fall in MSCI's broadest index of Asia-Pacific shares outside Japan, while the benchmark STOXX index of European shares fell 0.92 percent.

All major sectors fell, with utilities and commodity-linked stocks leading declines, as investors awaited May Purchasing Managers Index data due in the morning session for clues about the slowing economy.

Citi analysts said their analysis showed bearish positioning on US equity futures had started to stabilise, and those holding "short" positions were closing out those bets after making hefty profits.

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European stock market positioning remains short but here too the bearish momentum is slowing, they added.

The dollar index, which tracks its performance against a basket of major currencies, meanwhile fell 0.3 percent to 101.81, a one-month low.

The euro held near one-month highs as odds narrowed on a July rate rise from the ECB.

That saw the euro at $1.0727, having bounced 1.2 percent overnight in its best session since early March. It now faces stiff chart resistance around $1.0756.

DISAPPOINTING DATA

Markets had taken some comfort from US President Joe Biden's comment on Monday that he was considering easing tariffs on China, and from Beijing's ongoing promises of stimulus.

Unfortunately, China's zero-COVID policy and its lockdowns have already done considerable economic damage.

"Following disappointing April activity data, we have downgraded our China GDP (gross domestic product) forecast again and now look for 2Q GDP to contract 5.4 percent annualised, previously '1.5 percent," warned analysts at JPMorgan.

"Our 2Q global growth forecast stands at just 0.6 percent annualised rate, easily the weakest quarter since the global financial crisis outside of 2020."

The early surveys of European and US manufacturing purchasing managers for May could show some slowing in what has been a resilient sector of the global economy.

Japan's manufacturing activity grew at the slowest pace in three months in May amid supply bottlenecks, while Toyota announced a cut in its output plans.

Analysts have also been trimming growth forecasts for the United States given the Federal Reserve seems certain to hike interest rates by a full percentage point over the next two months.

The hawkish message is likely to be driven home this week by a host of Fed speakers and minutes of the last policy meeting due on Wednesday.

The European Central Bank is also turning more hawkish, with President Christine Lagarde surprising many by opening the door for a rate rise as early as July.

The pullback in the dollar helped gold regain some ground to $1,856 an ounce.

Oil prices were caught between worries over a possible global downturn and the prospect of higher fuel demand from the US summer driving season and Shanghai's plans to reopen after a two-month coronavirus lockdown.

US crude eased 66 cents to $109.08 per barrel, while Brent fell 1.14 percent to $112.14.
Reuters
first published: May 24, 2022 03:02 pm
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