August 17, 2022

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Stocks stumble on growth fears and lower bond yields

Stocks stumble on growth fears and lower bond yields
  • Stocks fall due to weak earnings and bearish economic data
  • China talks about stimulus, but the economic damage has already been done
  • Euro approached 4-week high as Lagarde announced interest rate hike in July

NEW YORK/LONDON (Reuters) – Stocks fell across the world on Tuesday as the supply chain hit corporate profits, soaring costs and slowing industrial production, while Treasury yields slumped as weakness in equities revived the safe-haven offer of US government debt. .

The stock market’s two-day rebound ended as investors worried about slowing economies. Corporate profit margins squeezed, as rising inflation forced consumers to cut discretionary spending.

Business activity in the US and the Eurozone slowed in May. S&P Global attributed the decline in its US composite PMI output to “rising inflationary pressures, additional deterioration in supplier delivery times and weak demand growth.”

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Soaring freight and raw material prices led to Abercrombie & Fitch (ANF.N) To say it will face headwinds until at least the end of the year, the day after Snapchat started, a parent (SNAP.N) He said the US economy worsened faster than expected in April. Read more

The economy is likely to decline as the Federal Reserve raises interest rates to stem inflation, said David Petrosinelli, chief trader at InspereX.

“It’s all about a hard landing and the Fed is really stuck in a corner with only demand-side tools to help,” he said. “They really need to crush the demand.”

MSCI’s benchmark for stocks worldwide (.MIWD00000PUS) It closed down 0.91%. Pan-European STOXX 600 Index (.stoxx) It decreased 1.14%.

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On Wall Street, Nasdaq Composite (nineteenth) The S&P 500 is down 2.35%. (.SPX) It lost 0.81% as investors turned to defensive positions. But stocks tie losses late and the Dow Jones Industrial Average (.DJI) He managed to close 0.15%.

Shares value rose 0.17% while shares rose (.IGX) It fell 1.90%.

Snap shares fell 43.1%, sending many social media and internet stocks down. Abercrombie shares fell 28.6 percent.

In Europe, all major sectors posted a broad decline, with luxury stocks and retailers taking the lead.

European Central Bank President Christine Lagarde said she saw the ECB’s deposit rate at zero or “a little bit higher” by the end of September, meaning an increase of at least 50 basis points from its current level as the bank battles inflation.

“This has raised nervousness in global markets about the possibility that the European Central Bank will at least take a more aggressive move,” said Phil Shaw, chief economist at Investec in London.

“There were reports overnight that some hawks in the Governing Council believed her comments yesterday ruled out a 50 basis point increase, but her comments today seem to have left that on the table,” he said.

The yield on German 10-year Treasuries fell 9 basis points to 0.959%, ​​Treasury yields slipped to their lowest in one month, and the benchmark 10-year Treasury yields fell 9.8 basis points to 2.761%.

The US Dollar Index hit its lowest level in almost a month after Lagarde’s comments gave a boost to the Euro.

The dollar index fell 0.362 percent, with the euro rising 0.39 percent to $1.0731.

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Biban Ray, North America head of FX strategy at CIBC Capital Markets, said Lagarde’s comments should pressure the US dollar in the short term after its recent rally to a two-decade high.

“The broader overall background continues to support risk-taking,” Ray said. “The dollar still has more room to beat in the medium term.”

frustrating data

Markets took some relief from US President Joe Biden’s comment on Monday that he was considering easing tariffs on China, and from Beijing’s continued promises of stimulus. Read more

However, China’s COVID-19-free policy and lockdowns have already caused significant economic damage.

JPMorgan cut its forecast for China’s second-quarter GDP to 5.4%, a contraction of 1.5% from the previous forecast, after disappointing data in April. On an annualized basis, its global outlook for the quarter is 0.6%, the weakest since the global financial crisis outside of 2020.

Oil prices were little changed as supply concerns eased concerns about a possible recession and China’s COVID-19 restrictions.

US crude futures closed down 52 cents at $109.77 a barrel, and Brent rose 14 cents to settle at $113.56.

Gold prices rose to their highest in two weeks as the metal’s safe-haven appeal increased due to a weaker US dollar and lower Treasury yields.

US gold futures were up nearly 1% at $1,865.40 an ounce.

Bitcoin was last up 0.99% to $2,9371.04.

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(Additional reporting by Herbert Lash in New York and Lawrence White in London.) Reporting by Wayne Cole in Sydney; Editing by Simon Cameron Moore, Jonathan Otis, Tomasz Janofsky and David Gregorio

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