Stocks slump as Snap cracks rally, Lagarde lifts euro

Stocks slump as Snap cracks rally, Lagarde lifts euro

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LONDON — Shares slid worldwide on Tuesday as fears about weak earnings and slowing growth punctured the recent mini-rally, while hawkish remarks from European Central Bank Chief Christine Lagarde reminded edgy markets that rate hikes loom.

Nasdaq futures lost 2.06%, with traders blaming an earnings warning from Snap which saw shares in the Snapchat owner tumble 28%, while S&P 500 futures slipped 1.47%.

That followed a 1.4% fall in MSCI’s broadest index of Asia-Pacific shares outside Japan, while the benchmark STOXX index of European shares fell 1.1%.

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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.

Italian and Greek bond yields meanwhile touched recent highs after Lagarde said on Tuesday she saw the ECB’s deposit rate at zero or “slightly above” by the end of September, implying an increase of at least 50 basis points from its current level.

The comments came a day after Lagarde accelerated a policy turnaround that has seen her go from all but ruling out a move this year to penciling in several hikes.

“It has raised jitters in global markets about the possibility at least of a more aggressive move by the ECB,” said Phil Shaw, Chief Economist at Investec in London.

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“There were reports overnight that some hawks on the governing council thought her comments yesterday seemed to rule out a 50 basis point hike, but her remarks today appeared to leave that on the table,” he said.

Germany’s 10-year Bund yield fell to 0.98%.

The dollar index, which tracks its performance against a basket of major currencies, meanwhile fell 0.2% to 101.95, 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 $1.0715, having bounced 1.2% overnight in its best session since early March. It now faces stiff chart resistance around $1.0756.


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

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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% annualized, previously ‒1.5%,” warned analysts at JPMorgan.

“Our 2Q global growth forecast stands at just 0.6% annualized rate, easily the weakest quarter since the global financial crisis outside of 2020.”

The early surveys of European and U.S. 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.

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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 pullback in the dollar helped gold regain some ground to $1,858 an ounce.

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

U.S. crude eased 20 cents to $110.10 per barrel, while Brent fell 0.19% to $113.24.

(Additional reporting by Wayne Cole in Sydney Editing by Kim Coghill, Jason Neely & Simon Cameron-Moore)



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