Shares drop after Microsoft signals darker tech outlook

Bloomberg

Equity markets slipped on Wednesday after tech giant Microsoft Corp. and a slew of other major firms forecast slowing earnings, while lackluster US business activity data reminded investors of the likelihood of recession in the world’s biggest economy.
Contracts for the Nasdaq 100 fell more than 0.5%, after a two-day rally in the underlying index ground to a halt when Microsoft warned of decelerating revenue growth in its cloud-computing business. Earnings reports from companies such 3M Co. and chipmaker Texas Instruments Inc. also reinforced concerns about the health of corporate America and added to investors’ jitters as they await updates from the likes of Tesla Inc. and IBM Corp.
Europe’s Stoxx 600 equity index weakened too, with shares in major software firms such as SAP SE and Sage Group Plc. feeling the heat from Microsoft and Dutch chip-tool maker ASML Holding NV posting a profit miss.
“The risks that dominated 2022 trading would seem to still pose major hurdles to a lasting equity bull market; namely, economic uncertainty, approaching recession, and a hawkish Fed actively wanting to keep financial conditions from loosening,” Bank of America (BofA) strategists told clients in a note.
The Federal Reserve is widely expected to raise interest rates by 25 basis points at its upcoming meeting and expectations it will soon wind down its policy-tightening cycle have weighed on the dollar and Treasury yields. The dollar, down around 1.8% this year, was hurt on January 24 by data showing US business
activity still in contractionary territory.
However, the greenback’s gauge held around flat on Wednesday, as the yen, euro and pound retreated and the global market mood soured.
The euro slipped for the first time in six sessions, while the pound edged lower as data showed sharp declines in factory costs, fanning speculation that the Bank of England is close to completing its rate-hiking cycle. The Australian dollar on the other hand jumped to the highest since August after scorching inflation figures, that boosted rate-hike bets and sent the 10-year Australian yields
soaring about 10 basis points.
Elsewhere, oil prices steadied after the sharp decline caused by the weak US business activity, while gold inched lower after recent gains that pushed the precious metal to the highest level since April.
S&P 500 futures fell 0.3% as of 3:37 am New York time and Nasdaq 100 futures fell 0.6%.
While futures on the Dow Jones Industrial Average fell 0.2%, the Stoxx Europe 600 fell 0.1% and the MSCI World index was little changed. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.6%.
The MSCI Asia Pacific Index rose 0.3% and the MSCI Emerging Markets Index also climbs as much as 0.2%.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.0889.
While the British pound was little changed at $1.2327, the Japanese yen was little changed at 130.27 per dollar and the offshore yuan rose 0.1% to 6.7746 per dollar.