Wall Street hit by Walmart wiped out, gas fears knock Europe
World stocks slid and bond markets rallied on Tuesday as some disappointing earnings, the prospect of another super big US rate hike this week and the gas crisis loomed. in Europe are all worrying investors.
Asia was revolted overnight by a new Chinese plan to tackle its fortunes crisis and as tech giant Alibaba sought a major listing in Hong Kong, but Europe and the US Wall couldn’t keep up.
A warning about Walmart profits and another cut in the International Monetary Fund’s global growth forecast pushed Wall Street’s main markets lower at the open.
Europe’s STOXX 600 also started to slide after earlier gains from profit upgrades from consumer goods giant Unilever and higher stockpiles of goods.
But they were offset by fears of a broader recession when European Union leaders agreed to cut their nation’s gas use and as 9% of UBS shares fell to the state. Banking Sector.
Diamond Hill’s international equity portfolio manager, Krishna Mohanraj, said: “The key question we ask when these earnings are announced is the pricing power with which these companies are consumer face),” said Diamond Hill’s international portfolio manager, Krishna Mohanraj, referring to the pressures of higher inflation.
“What remains is whether the Fed can control inflation without killing the economy.”
A turbulent reboot on Wall Street sent shares of Walmart down about 9% after cutting its forecast on Monday due to those exacting issues.
General Electric was up 6% though after growth in the airline business helped it beat estimates. Coca-Cola was up 1% after raising its forecast while Unilever was up 2.5% after an earnings beat, with chief executive Alan Jope saying “strong valuation” helped it mitigate inflation. cost.
European Union countries have approved a weakening emergency plan to limit their gas use sooner after reaching compromise agreements to limit the impact on some countries as they prepare for cutting Russian supply.
The Kremlin warned again that state monopoly Gazprom will reduce supply further this week due to another maintenance problem on the Nord Stream 1 pipeline, halving already reduced flows.
That sent European gas prices up nearly 10% and are now 450% higher than a year ago, though still well below the record high hit shortly after Russia began its invasion of Ukraine in February.
“It’s a game of cat and mouse,” said Christopher Granville, Executive Director of EMEA & Global Political Research at TS Lombard.
“Russia’s position will always be that they will continue to supply gas to the limited extent caused by Western sanctions. But then they will discover a lot of unexpected problems.”
Graphics – European gas prices soar
Depressed, IMF recession
Investors are also awaiting a likely 75 basis point rate hike by the Federal Reserve on Wednesday – with the market pricing in about 10% greater upside risk. They will also want to see if economic warning signs prompt a change in rhetoric.
The IMF cut its global growth forecast again on Tuesday, warning that high inflation and the impact of the Ukraine war would push the world economy to the brink of recession if left unchecked.
It now sees global real GDP growth of 3.2% in 2022, down from the 3.6% predicted in April, adding that the world economy has indeed contracted. in the second quarter due to recession in China and Russia.
For the US, however, the IMF confirmed its July 12 forecast of 2.3% growth in 2022 and 1.0% anemia for 2023, a figure that has been cut twice since April. .
“The outlook has turned significantly murky since April. The world may soon be tipped on the brink of a global recession, just two years after recession,” said IMF chief economist Pierre-Olivier Gourinchas. final”.
Not high tech
Global tech giants Microsoft and Google both report after a Wall Street session later, followed by Facebook owner Meta tomorrow and Apple and Amazon on Thursday.
It adds more than $7.5 trillion to market capitalization, said Jim Reid of Deutsche Bank, pointing out that those five stocks are still valued at nearly $10 trillion at the start of the year.
In Asia, MSCI’s broadest regional index outside Japan was up 0.5%.
Chinese stocks jumped after news that the country would set up a fund of up to $44 billion to help property developers.
Hong Kong’s Hang Seng index ended 1.7% higher on Alibaba news although Japan’s Nikkei fell 0.16%.
In terms of currencies, the dollar is driving recent key highs as uncertainty continues around interest rates and the economic outlook.
The euro fell back to $1.0139 from $1.0250 affected by those worried about Europe’s energy security.
The yen was steady at 136.44 per dollar. The US dollar index, which touched a 20-year high this month, was up 0.6% on the day at 107.132.
Oil prices continued to rise on expectations that Russian gas supply cuts could encourage a shift to crude, with Brent crude futures up 1.5% to $106.68 a barrel and US crude up 1 percent. .6% at 98.21 USD/barrel.
The yield on the benchmark 10-year Treasury note fell to 2.73% from 2.87% at the end of last week. The benchmark German 10-year yield has also fallen below the psychological 1 percent threshold on growing European recession fears.
Tuesday also marked the 10th anniversary since ECB President Mario Draghi pledged to do “whatever is necessary” to prevent the breakup of the eurozone.
