Aurelia Butler

Investing.com — Snap snaps the relief rally with a profit warning that sends chills through social media stocks. Chinese markets don’t like the government’s stimulus plans after taking a second look at them. Pandemic winner Zoom Video reports a big improvement in profitability. Federal Reserve Chair Jerome Powell is due to speak amid signs that some are thinking already of when the Fed can afford to ‘pause’ rate hikes. The dollar drops as Christine Lagarde keeps a 50 basis point hike in July on the table for the ECB. And the American Petroleum Institute’s stockpiles data will show how far, if at all, Americans are cutting down on driving due to high gas prices. Here’s what you need to know in financial markets on Tuesday, 24th May.1. Snap snaps the rallyA profit warning from Snap quickly put an end to Monday’s relief rally after the closing bell, putting global markets back into risk-off modeThe Snapchat parent said conditions had worsened “further and faster” than it expected when it put out a disappointing earnings statement last month. Various reports also cited an internal memo from CEO Evan Spiegel saying that the company will slow hiring and defer some expansion plans to next year, as well as looking for increased cost savings this year. Snap (NYSE:SNAP) stock fell over 30% in response.The news came only hours after an upbeat outlook from JPMorgan (NYSE:JPM) CEO Jamie Dimon had reassured investors of the ongoing underlying strength of demand in the U.S. economy, something that will bolster its core lending business. JPMorgan stock rose over 6% in response, but gave back just under 1% in premarket trading Tuesday.2. China sentiment hit as stimulus plan is reappraised; Uighur news also weighsRisk sentiment was also hurt overnight by a gloomier reassessment of the fiscal stimulus package adopted by the Chinese cabinet late on Monday.The measures, which include over $20 billion of tax cuts and rebates, may stimulate economic activity at the margins, but are unlikely to outweigh the effect of lengthy wholesale shutdowns of activity for cities such as Shanghai and Beijing, if the country sticks – as indicated – to its Zero-COVID policy.Foreign investor sentiment toward China also faces a new headwind in the disclosure by German magazine Der Spiegel of conditions in the region of Xinjiang, documenting what it calls major human rights abuses toward the mainly Muslim Uighur population.3. Stocks set to open lower; social media under pressure but Zoom set to bounce U.S. stocks are set to open lower later, giving back around half of what they gained in Monday’s bounce. The respective news from JPMorgan and Snap put value stocks back firmly in outperformance mode, while growth stocks are struggling again.By 6:20 AM ET, Dow futures were down a relatively modest 210 points, or 0.7%, while S&P 500 futures were down 1.1% and Nasdaq 100 futures were down 1.7%.Snap, which is still quoted down 29%, is putting pressure on other social media and advertising-themed stocks such as Meta (NASDAQ:FB) and Twitter (NYSE:TWTR) in premarket. Other stocks likely to be in focus later include Zoom Video (NASDAQ:ZM), which reported better profits but its slowest growth ever in the latest three months. Zoom stock was up 6.4% in premarket.4. Powell to speak; New home sales dueFederal Reserve chair Jerome Powell will speak at 12:20 PM ET, a day after two senior colleagues dropped the first hints of a moderation in the planned pace of monetary policy tightening.Atlanta Fed President Raphael Bostic had said on Monday that the Fed may be able to afford a pause in rate hikes after two more increases of half a point each, while Kansas City’s Esther George suggested a pause could be possible when the Fed funds target range reaches 2% (up from 0.75%-1% now).New home sales for April and business surveys from the Chicago and Richmond Feds are due later.The US Dollar Index fell in overnight trading however as ECB President Christine Lagarde declined a chance to rule out a half-point rate hike in July, having all but confirmed on Monday that the era of negative rates will end by September. The Eurozone composite PMI fell more than expected in May, however.5. Oil drifts as gasoline prices hit new highs; API eyedCrude oil prices drifted, with tight supply, the reopening of Shanghai, and continued strong demand in the U.S. still dominating. Average U.S. gasoline prices now stand at a new record high of $4.5980 a gallon, according to the American Automobile Association.The dollar’s sudden weakness is also encouraging global buyers, but prices remain at a level that will destroy demand in the medium term. Newswires quoted India’s Energy Minister as saying that prices of $110 a barrel “are unsustainable” for his country, one of the world’s biggest importers.By 6:35 AM ET (1035 GMT), U.S. crude futures were up 0.1% at $110.36 a barrel, while Brent crude was down 3c at $110.75 a barrel. The American Petroleum Institute’s data on crude and product stockpiles are due at 4:30 PM ET. More

Stock markets dropped on Tuesday as downbeat surveys on business confidence and weak overnight earnings from social media group Snap intensified nerves about the global growth outlook.Europe’s regional Stoxx 600 share index, which has lost more than a tenth so far this year as the economic impact of Russia’s invasion of Ukraine combined with the eurozone and UK central banks tightening monetary policy, fell 0.7 per cent in morning trading. London’s FTSE 100 fell 0.2 per cent and Germany’s Xetra Dax lost 0.9 per cent, after all major Asian stock indices swung into the red earlier in the session. German businesses were “hiking their charges for goods and services to offset the higher cost of energy, fuel, raw materials and personnel,” according to a report accompanying S&P Global’s May flash purchasing managers’ index for the dominant eurozone economy. Japanese manufacturing activity was also expanding 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 placed on Russia” and “lockdown measures across China. Investors’ nerves were further rattled by weak earnings from social media company Snap, which was down almost 30 per cent in US pre-market trading on Tuesday. The Snapchat parent, one of a group of social media businesses whose shares boomed during coronavirus lockdowns, said after the closing bell on Monday that “the macroeconomic environment has deteriorated further and faster than anticipated” since it issued guidance in April.“The economic cycle is likely to be slowing down to a rapid extent,” said Zehrid Osmani, manager of Martin Currie’s global portfolio trust. Investors were poised for analysts to widely downgrade their earnings forecasts for large companies this year, he added, meaning “it unnerves the market when companies disappoint”. Facebook owner Meta was down almost 7 per cent in pre-market trading. Twitter dropped 4 per cent and Pinterest fell 14 per cent. Futures contracts tracking the technology-heavy Nasdaq 100 share index dropped 1.7 per cent, while those tracking Wall Street’s S&P 500 — which bounced almost 2 per cent higher on Monday following seven consecutive weeks of losses — lost 1.1 per cent. In another sign of the growth jitters, the yield on the 10-year US Treasury note, which moves inversely to the price of the benchmark debt security, fell 0.04 percentage points to 2.82 per cent as traders bought up the low-risk asset. Germany’s equivalent Bund yield dipped 0.01 percentage points to 1.01 per cent. The euro, which had rallied on Monday, rose 0.2 per cent against the dollar to $1.07. Sterling slipped 0.6 per cent lower to $1.25. Brent crude, the worldwide oil benchmark, added 0.1 per cent to $113.47 a barrel.In Asia, Hong Kong’s Hang Seng index closed 1.7 per cent lower and Tokyo’s Nikkei 225 dropped 0.9 per cent. More

In April, banks had to transfer an additional 11.2 billion hryvnias of their earnings to reserves to cover possible future losses linked to the war. In March, banks transferred to reserves almost 15.8 billion hryvnias.Russia’s invasion on Feb. 24 has harmed business activities, prevented many companies and individuals from servicing their loans and led to the banking system’s first losses since 2017.The central bank said the return on assets ratio of the banking system – an indicator of profitability – had worsened to minus 1.11% as of end-April from minus 0.03% as of end-March. The central bank has said the war could cause Ukraine’s economy to contract by at least one-third in 2022 and drive up inflation to over 20%.($1 = 29.2500 hryvnias) More

COLOMBO (Reuters) -Sri Lanka increased fuel prices on Tuesday, a long-flagged move to mend public finances and combat its debilitating economic crisis, but the hikes are bound to add to galloping inflation at least in the short term.Power and Energy Minister Kanchana Wijesekera said in a message on Twitter (NYSE:TWTR) that petrol prices would increase by 20-24% while diesel prices would rise by 35-38% with immediate effect. Daily limits on how much each consumer can purchase will continue.”The government will hold talks with transport sector stakeholders to increase costs parallel to the latest increases,” he later said in an online cabinet briefing.Fuel and transport price increases will inevitably flow through to food and other goods, economists said.Annual inflation in the island nation rose to a record 33.8% in April compared with 21.5% in March, according to government data released on Monday.”Not only the petrol problem – consumer prices, everything is very high, food is also very high,” said businessman Mohammad Irfan, waiting in a queue at a gas pump in the capital, Colombo. He said he had been there for four hours.”It is very difficult for the poor people, middle class people. They are facing problems day by day.” Sri Lanka is in the throes of its worst economic crisis since independence in 1948, as a dire shortage of foreign exchange has stalled imports and left the country short of fuel and medicines, and struggling with rolling power cuts.The financial trouble has come from the confluence of the COVID-19 pandemic battering the tourism-reliant economy, rising oil prices, and populist tax cuts by the government of President Gotabaya Rajapaksa and his brother, Mahinda, who resigned as prime minister this month.Wijesekera said people would be encouraged to work from home “to minimise the use of fuel and to manage the energy crisis”, and that public sector officials would work from their offices only when instructed by the head of their institutions.However, hybrid working models have led to increases in power consumption in other countries, including in neighbouring India.Economists have said fuel and power price hikes would be necessary to plug a massive gap in Sri Lanka’s government revenues, but agreed that it would lead to short-term pain.Dhananath Fernando, an analyst for Colombo-based think tank Advocata Institute, said prices of petrol have soared 259% since October last year and diesel by 231%. Prices of food and other essential goods have surged, he said.”Poor people will be the most effected by this. The solution is to establish a cash transfer system to support the poor and increase efficiency as much as possible.”Prime Minister Ranil Wickremesinghe, appointed in place of Mahinda Rajapaksa earlier this month after violence broke out when government supporters attacked protesters, said last week: “In the short term we will have to face an even more difficult time period. There is a possibility that inflation will increase further.”There were no immediate reports of protests or unrest after the price increases on Tuesday.The Sri Lankan Navy said on Tuesday it had apprehended 67 people attempting to illegally flee the country from the northeastern coast.GRAPHIC: Inflation in Sri Lankahttps://tmsnrt.rs/3qeFT4B More

DIHK said it now expects the inflation rate to hit 7%, after initially forecasting a rise of 3.5% in its February forecast.Germany’s economy ministry said in April it saw an inflation rate of 6.1% in 2022 and 2.8% next year, citing the effects of energy prices in Europe’s biggest economy. Nearly 40% of the roughly 25,000 companies surveyed plan to pass on the higher costs on to customers, said DIHK. In particular, more than every second company in industry and trade said it was intending to pass on the cost increases. Overall, the DIHK expects economic growth of 1.5% in 2022. One of the key drivers is set to be private consumption, which is expected to grow 3% this year from 0.1% in 2021, while government expenditures are likely to stagnate this year.   More

JAKARTA (Reuters) – Indonesia’s central bank announced on Tuesday more aggressive hikes in the reserve requirement ratio (RRR) for banks, expecting inflation to rise slightly above its target band this year, but kept interest rates unchanged at a record low. Bank Indonesia (BI) announced a quicker pace in RRR hikes, ordering banks to park 7.5% of their reserves starting July and 9% from September. This compared with BI’s previously announced policy path, in which BI had set three staggered RRR hikes this year from 3.5% to 6.5% in September.BI left the benchmark 7-day reverse repurchase rate at a record low of 3.50%, as expected by 25 of 27 economists polled by Reuters. Its two other main rates were also unchanged.During the pandemic, BI cut interest rates by a total of 150 basis points and injected billions of dollars into the financial system and the RRR hikes were its first move to normalise monetary policy.Governor Perry Warjiyo said inflation will be slightly higher than BI’s 2% to 4% target range this year, but will come down to within target next year, which he described as “manageable”.The inflation outlook “reduces the need to respond through interest rates like other central banks,” Warjiyo said.”The acceleration of liquidity normalisation is a step for BI to maintain stability, while continuing to support growth and loans to the business world,” he said in an online news conference.The additional RRR hikes are set to mop up 110 trillion rupiah ($7.51 billion) of liquidity from the banking system, but Warjiyo said this should not affect lenders’ ability to loan.He has previously said BI would maintain interest rates at record lows until it sees signs of pressure on core inflation. April’s annual inflation hit 3.47%, a two-year high.The government last week obtained parliamentary approval to boost energy subsidies by $24 billion to keep most energy prices unchanged in a bid to curb accelerating inflation.Radhika Rao, senior economist at DBS Bank in Singapore, said in an email energy subsidies had dampened inflation risks.”This coupled with limited rupiah depreciation versus regional peers lowered the urgency for Bank Indonesia to normalise policy,” said Rao, noting how “non-rate levers” like RRR were being used to absorb liquidity.The rupiah has come under pressure in recent weeks amid expectations for faster U.S. rate hikes, but its falls have been more limited than some other Asian emerging market currencies.However, Myrdal Gunarto, Maybank Indonesia’s economist, predicted BI will start raising interest rates at the June policy meeting, with inflation seen exceeding the benchmark rate level. He expects a total of 75 basis points of rate hikes this year.Indonesia’s economy grew 5.01% in the first quarter, helped by a boom in commodities’ exports and the reopening of the economy from COVID-19 curbs.BI kept its 2022 GDP outlook at 4.5% to 5.3%.($1 = 14,655.0000 rupiah) More

BRUSSELS (Reuters) – The 27 members of the European Union should reach a unanimous agreement on the implementation of a global minimum corporate tax by June 17, French Finance minister Bruno Le Maire said on Tuesday, adding Poland will eventually be won over.”I’m confident this minimal tax rate project will be adopted unanimously on June 17, that is the goal”, he told reporters before an Economic and Financial Affairs Council in Brussels.Poland is the lone holdout in the European Union’s implementation plan for the minimum tax after it vetoed a compromise in April to launch the 137-country agreement reached last October aiming to end a competitive downward spiral in corporate tax rates.Poland’s acceptance is essential for the deal to proceed.June 17 is the date set for the next Economic and Financial Affairs Council (Ecofin). More

Rising inflation and a cost of living squeeze pose a new threat to the recovery of London’s West End since coronavirus restrictions were lifted, according to landlord Shaftesbury.Cafes, bars and shops on the FTSE 250 company’s estate, which includes Chinatown, Carnaby Street and parts of Soho have monthly turnover running 7 per cent higher than before the pandemic. But the company warned that businesses on its 16-acre estate and elsewhere are “having to deal with a complex range of operational challenges”.“Inflationary pressures, tax increases, rising cost of finance and supply chain disruption could weigh on the outlook for consumer confidence and spending,” the group said. Shaftesbury chief executive Brian Bickell predicted inflation would continue to rise for some time but said the business was well placed to weather the storm.“The West End is not immune but it has always had a more affluent customer base, [and] its got the international element,” he said.“We’re not into the world of luxury — that could come under pressure if people are feeling less affluent.” A rebound in trading in the group’s estate led to rising rents and a 7.5 per cent increase in the valuation of Shaftesbury’s portfolio in the six months to the end of March. Net income from property was £41mn in the six-month period, 55 per cent above the same period a year earlierThe estate is now valued at £3.3bn, still 17 per cent below its pre-pandemic level. “It’s not quite job done yet but we’re a long way down the road to recovery; further down than we expected,” said Bickell.John Cahill, an analyst at Stifel, said the company was likely to be relatively well insulated from the worst impacts of the cost of living crisis.“Central London is not bulletproof, but compared to the rest of the UK it is as close to as its possible to be.” Shaftesbury is in talks with Covent Garden owner Capco over a merger that would create a West End landlord with a market capitalisation of more than £3.5bn. The company confirmed that talks were advanced but added there was no certainty a deal would happen. Capco, whose tenants include a number of luxury brands, “could be a bit more exposed to a decline in consumer confidence”, said Cahill.“I wouldn’t get too worried about the Apple store just yet, but a high-end fashion retailer? Maybe,” he added. More