Stock markets tumble on renewed growth and inflation fears

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Global stock markets fell on Tuesday as pessimistic business confidence surveys and weak earnings from social media group Snap heightened worries about the outlook for global growth.

On Wall Street, the tech-heavy Nasdaq Composite stock index fell 2.3%, while the S&P 500 – which rebounded nearly 2% on Monday after seven straight weeks of losses – lost 1, 2%.

Investors’ nerves were rattled after social media group Snap said late Monday that “the macroeconomic environment has deteriorated further and faster than expected” since it issued guidance in April. Shares of the parent company of Snapchat, one of a group of social media companies that have soared during coronavirus shutdowns, fell 37% in early trades.

Facebook owner Meta was down 8%. Twitter fell 2% and Pinterest 20%. Alphabet, Google’s parent company, fell 6%. JPMorgan analysts said they “believe Snap’s cautious tone creates additional downside risk to other online ad estimates” and that Google, Meta and Pinterest “could experience similar headwinds.”

On Tuesday, Best Buy joined other major U.S. retailers in cutting its full-year profit forecast, despite the electronics chain reporting better-than-expected sales. Clothing retailer Abercrombie & Fitch also slashed its full-year sales and margin forecast due to soaring costs, sending its shares down about 30%. The disappointing updates came after US consumers Target and Walmart posted similarly bleak outlooks last week.

“These big companies are telling us that inflation is high and hurting consumer spending,” said Marija Veitmane, multi-asset strategist at State Street. “Looking at their advice, they also don’t think it’s going to get better very quickly.”

Meanwhile, the Purchasing Managers’ Indexes of major economies, released on Tuesday, further underscored how companies were grappling with higher costs.

German companies were ‘raising their prices for goods and services to offset the rising cost of energy, fuel, raw materials and personnel,’ according to a report accompanying S&P Global’s May flash PMI for the mainstream economy. of the euro area.

Japanese manufacturing activity was also growing at its slowest pace in three months, according to an equivalent PMI survey for the Asian nation, which its compilers blamed on “supply chain disruptions” from “economic sanctions imposed on the Russia” and lockdown measures across China.

“The economic cycle is expected to slow rapidly,” said Zehrid Osmani, global trust portfolio manager at Martin Currie.

“What we see in these PMIs is that with supply chain issues and inflation, nothing is set yet,” added Bastien Drut, chief macro thematic strategist at CPR Asset Management. China’s lockdowns and the war in Ukraine, he added, “are fueling inflation in the United States and Europe and that’s not going to stop any time soon.”

Europe’s regional Stoxx 600 equity index, which has lost more than a tenth so far this year, fell 0.5%. Hong Kong’s Hang Seng stock index closed down 1.8% and Tokyo’s Nikkei lost 0.9%.

In another sign of growth jitters, the yield on the 10-year US Treasury, which moves inversely to the price of the benchmark debt security, fell 0.06 percentage points to 2.79%, with traders who bought the low-risk asset. The German Bund’s equivalent yield fell 0.03 percentage point to 0.99%.

In currencies, the pound fell 0.7% against the dollar to just below $1.25 after the PMI survey for the UK showed growth in manufacturing activity and services in the country had slowed to its lowest rate in more than a year.

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