- European shares calmed as fears escalated over the gas crisis
- Walmart sees huge loss after profit warning.
- Big List of Tech Dividends Due on Wall Street Later
- Bond yields fall ahead of expected Fed rate hike
LONDON (Reuters) – Global stocks slid and bond markets surged on Tuesday with some disappointing gains, the prospect of a massive US interest rate hike this week and a looming gas crisis in Europe jittery investors.
Asia rebounded overnight with a new Chinese plan to tackle its real estate crisis, and with tech giant Alibaba seeking a primary listing in Hong Kong, but Europe and Wall Street couldn’t keep up.
Walmart’s earnings warning and another cut in the International Monetary Fund’s global growth forecast sent major markets on Wall Street lower at their open. Stokes 600 in Europe (.stoxx) It also started to decline after an earlier batch of profit upgrades from consumer goods giant Unilever (ULVR.L) High stock of goods.
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But it was offset by broader recession fears as EU leaders agreed to cut gas use in their countries by 9%. (UBSG.S) The decline in UBS shares hit the banking sector. Read more
“The main question we have as these earnings come in is how aggressively these (consumer-facing) companies have pricing,” said Krishna Mohanraj, International Equity Portfolio Manager, Diamond Hill, referring to rising inflation pressures.
“The other issue is will the Fed be able to control inflation without killing the economy.”
The turbulent restart on Wall Street sent Walmart shares down about 9% after it lowered its forecast on Monday due to those specific issues. Read more.
General Electric (GE.N) It rose 6% although growth in the aviation business helped it beat estimates. coca cola (KO.N) A 1% gain after it raised expectations while Unilever stock rose 2.5% after beating earnings, with CEO Alan Jope saying “strong pricing” enabled it to mitigate cost inflation. Read more
European Union countries agreed a weak contingency plan to curb their gas use earlier also after striking compromise deals to limit damage to some countries as they prepare for further cuts in Russian supplies. Read more
The Kremlin again warned that the state monopoly of Gazprom (GAZP.MM) It will cut its supply further this week due to another maintenance issue on its Nord Stream 1 pipeline, halving already low current flows. Read more
This sent European gas prices up about 10% and are now more than 450% higher than they were a year ago, although still well below the record highs set shortly after Russia began its invasion of Ukraine in February.
“It’s a cat-and-mouse game,” said Christopher Granville, managing director of EMEA and global political research at TS Lombard.
“Russia’s position will always be that it will continue to supply gas under the restrictions caused by Western sanctions. But then they will find a lot of problems that suddenly arise,” he added.
FED UP, IMF down
Investors are also waiting for a possible 75 basis point Fed rate increase on Wednesday – with markets pricing around 10% the risk of a larger rally. They will also want to know if economic warning signs are leading to a shift in rhetoric.
The International Monetary Fund cut its global growth forecast again on Tuesday, warning that high inflation and the impact of the Ukraine war will push the global economy to the brink of recession if left unchecked. Read more
She now sees global real GDP growth of 3.2% in 2022, down from 3.6% projected in April, adding that the global economy had already contracted in the second quarter due to downturns in China and Russia.
But for the United States, the International Monetary Fund confirmed its forecast on July 12 of growth of 2.3% in 2022 and anemia of 1.0% for 2023, which it had cut twice since April.
“The outlook has become significantly bleak since April. The world may soon teeter on the brink of a global recession, just two years after the last recession,” said IMF chief economist Pierre-Olivier Gorenchas.
Not high tech
It’s adding over $7.5 trillion in market capitalization, Jim Reed of Deutsche Bank said, noting that those five stocks were still valued at nearly $10 trillion at the start of the year.
In Asia, MSCI’s broadest regional index outside Japan (MIAPJ0000PUS.) had rebounded 0.5%.
Chinese stocks jumped after reports that the country will create a fund of up to $44 billion to help real estate developers. Read more
In terms of currencies, the dollar has been pushing towards its recent gains as uncertainty continues to swirl around the interest rate and economic outlook. / FRX
The Euro slipped back to $1.0139 from $1.0250 being trapped by the energy security contenders in Europe. Read more
The yen settled 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 rose further on expectations that gas supply cuts in Russia could encourage a switch to crude, with Brent crude futures continuing to rise 1.5% at $106.68 a barrel, and US crude rising 1.6% to $98.21 a barrel. Read more
The 10-year Treasury yield fell to 2.73% from 2.87% at the end of last week. German benchmark 10-year bond yields slipped back below the psychological 1% threshold as well as recession fears intensified in Europe.
Tuesday also marks the 10th anniversary since then, European Central Bank President Mario Draghi pledged to do “whatever it takes” to prevent the breakup of the eurozone.
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Additional reporting by Ken Woo from Hong Kong. Editing by Edmund Kelman, Angus McSwan and Thomas Janowski
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