Stocks, futures decline as tech slides; euro advances

Bloomberg

Stocks declined on Tuesday after a profit warning from Snap Inc weighed on technology shares and fuelled concerns about risks to economic growth.
Tech shares were among the worst performers in Europe’s Stoxx 600, while Nasdaq 100 futures tumbled more than 2% and Chinese tech stocks by more than 4%. S&P 500 futures fall, just as the benchmark was starting to pull back from the brink of a bear market amid fears the Federal Reserve’s tightening could hurt economic growth.
The dollar was little changed, while Treasuries advanced. The euro climbed above $1.07 for the first time in four weeks as European Central Bank President Christine Lagarde said the currency bloc has reached a “turning point” in monetary policy and rejected the idea that the region is heading for a recession, but said the ECB won’t be rushed into withdrawing monetary stimulus.
Europe’s two largest economies kept growing in May as they benefited from a sustained rebound in services that offset fallout from Russia’s invasion of Ukraine. Meanwhile, the pound falls after a report show UK economy faces an increasing risk of falling into a recession as firms and households buckle under fastest
inflation rate in four decades.
Technology shares came under pressure globally after Snap warned it would miss second quarter profit and revenue forecasts amid deteriorating macroeconomic trends. The Snapchat owner plunged 30% after the close, while Meta Platforms Inc. and other companies that rely on digital advertising also tumbled.
Technology shares have been hammered this year amid rising interest rates and soaring inflation. Social media stocks are on course to shed more than $100 billion in market value after the Snap’s profit warning.
“It highlights how fleeting swings in sentiment are now and also that investors are running at the first sign of trouble,” Jeffrey Haley, a senior market analyst at Oanda Asia Pacific, wrote in a note. “The market continues to turn itself inside out and back to front as it tries to decide if it has priced all of the impending rate hikes, soft landing or recession, inflation or stagflation, China, Ukraine, US summer driving season, supply chains, the list goes on.”
Utilities were also among the biggest decliners in Europe, as Drax Group Plc, Centrica Plc and SSE Plc all sank on Tuesday following a report about UK plans for a possible windfall tax. Air France-KLM fell after plans to sell about 2.26 billion euros ($2.4 billion) of new shares to shore up its balance sheet. Oil and gas stocks underperformed as crude declined amid concerns about Chinese demand, while mining shares also fall alongside metal prices.
Chinese shares fall as traders shrugged off a raft of measures to shore up flagging growth from the Covid-19 lockdowns. UBS Group AG and JPMorgan Chase & Co. downgraded their forecasts for China’s economic growth this year.
Equities have been volatile as investors assess the outlook for monetary policy, inflation and impact of China’s strict Covid-19 policies on the global economy. Minutes on Wednesday of the most recent Federal Reserve rate-setting meeting will give markets insight into the US central bank’s tightening path.
In the US, Kansas City Fed President Esther George said she expects the central bank to raise interest rates to 2% by August, with the further course of tightening being guided by how surging inflation cools off.
“That is a big risk that the Fed doesn’t get the big economy signals and keeps marching along with a very aggressive tightening program,” Margaret Patel, senior portfolio manager at Allspring Global Investments, said on Bloomberg Television. “But if they look at the real world out there they will see it’s time to take a big pause.”