- Shares fall on bearish gains, economic data
- China is talking about stimulus, but the economic damage is already done
- The euro is approaching a four-week high as Lagarde announces a July rate hike
NEW YORK / LONDON, May 24 (Reuters) – Stocks fell worldwide on Tuesday as supply chain problems and rising costs hurt corporate profits and slowed manufacturing output , while Treasury yields fell as the weakness of equities revived a safe haven offer for U.S. government debt.
U.S. and eurozone business activity slowed in May, with S&P Global attributing the decline in its US-made PMI output to “high inflationary pressures, further deterioration in supplier delivery times, and weaker demand growth “.
The higher costs of rising freight and commodity prices led Abercrombie & Fitch Co (ANF.N) to say it will continue to face headwinds at least until the end of the year, a day after the Snapchat’s parent company Snap Inc (SNAP.N) said the US economy had worsened faster than expected in April. Read more
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A two-day recovery in stock was extinguished as investors took note of falling business profits due to persistent supply chain problems, exacerbated by the Ukrainian war, and rising inflation which has forced consumers to reduce discretionary spending.
The U.S. economy is likely to face a sharp slowdown as the Federal Reserve raises interest rates to curb inflation, according to David Petrosinelli, a senior trader at InspereX.
“It’s really a hard landing and the Fed is really stuck in the corner with just demand tools to help,” Petrosinelli said. “They really need to crush the demand.
“This is going to have a knock-on effect on the economy, and that’s why you’re seeing stock price action in stocks and bonds,” he said.
The worldwide MSCI stock index (.MIWD00000PUS) was down 1.69%, while the pan-European STOXX 600 index (.STOXX) was down 0.99%.
On Wall Street, the Dow Jones Industrial Average (.DJI) fell 1.37%, the Nasdaq Composite (.IXIC) fell 3.33% and the S&P 500 (.SPX) lost 2.16%. it was heading back to a bear market.
Shares of Snap fell 41.1%, dragging various shares of social media and the Internet, while Abercrombie fell 29%.
In Europe, utility companies (.SX6P) and commodity-linked stocks (.SXPP) (.SXEP) fell, but bank stocks rose.
European Central Bank chief Christine Lagarde said she saw the ECB’s deposit rate at zero or “slightly above” at the end of September, an increase of at least 50 basis points from its current level. .
The comments came a day after Lagarde accelerated a policy change that has seen him go through everything, but ruling out a move this year to make several rises.
“There is growing concern in global markets about the possibility of at least one more aggressive move by the ECB,” said Phil Shaw, chief economist at Investec in London.
“There were reports overnight that some governing council hawks thought their comments yesterday seemed to rule out a 50 basis point increase, but their comments today seemed to leave it on the table,” he said. .
The 10-year German Bund yield fell 7.3 basis points to 0.951%.
Treasury yields fell to a one-month low, as those of 10-year benchmark bonds fell 13 basis points to 2.729%.
The dollar index fell 0.333%, and the euro rose 0.38% to $ 1.073.
Lagarde’s comments in a blog post on Monday and a change that brought the U.S. currency to a two-decade high strengthened the dollar’s tactical weakness, said Bipan Rai, head of North American currency strategy at CIBC Capital Markets.
“The broader macro backdrop still supports risk-taking,” Rai said. “The dollar has even more room to run in the medium term.”
DISAPPOINTING DATA
Markets were comforted by US President Joe Biden’s comment on Monday that he was considering easing tariffs on China and Beijing’s stimulus promises. Read more
Unfortunately, China’s zero-COVID-19 policy and its blockades have already caused considerable economic damage.
JPMorgan lowered its second-quarter Chinese gross domestic product forecast to -5.4% from a previous -1.5% after disappointing data in April. On an annualized basis, its overall forecast for the quarter is 0.6%, the weakest since the great financial crisis outside 2020.
U.S. crude oil recently fell 0.05% to $ 110.23 a barrel and Brent was up $ 113.76, up 0.3% a day.
Cash added 0.8% to $ 1,867.57 an ounce.
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Report by Herbert Lash in New York and Lawrence White in London; additional report by Wayne Cole in Sydney; edited by Simon Cameron-Moore and Jonathan Oatis
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