U.S.A AND EUROPE EQUITY UNDER PRESSURE AMID GROWTH CONCERN
US futures wavered on Tuesday, reversing from early gains during the Asian trading hours, as Treasury yields continue to soar amid expectations the Fed will need to raise rates faster to curb rising prices. St. Louis Fed President James Bullard said that hikes of as much as 75bps should not be ruled out, increasing tightening expectations. Markets are current pricing in a 50bps hike in the fed funds rate next month. Meanwhile, the earnings season continues with Johnson & Johnson topping profit expectations but missing on revenues and lowering its full-year outlook. Earnings from Truist Financial, Travelers and Lockheed Martin beat expectations. Netflix and IBM are also due to report today. The major averages closed near the flatline in a seesaw session on Monday, with the Dow and Nasdaq Composite each falling 0.1%, while the S&P 500 was little changed.
European equity markets traded more than 0.5% lower on Tuesday, extending two weeks of losses with automakers and healthcare sectors among the worst performers. Investors react to news from the four-day Easter weekend including heightened tensions in the Russia-Ukraine conflict, downgraded global growth projections from the World Bank and signs of even faster tightening from the Federal Reserve. Russia’s long-expected offensive push into eastern Ukraine started on Monday, with intensified assaults in the Slobozhansky and Donetsk operational districts in the north and east of the country. Also, the World Bank cut its annual global growth forecast for 2022 to 3.2% from 4.1%, amid Russia’s invasion of Ukraine. Elsewhere, Fed Bullard said the central bank needs to move quickly to raise rates to 3.5% this year. Looking ahead, US earnings will be in the spotlight with Netflix and Johnson & Johnson among the companies reporting Tuesday.
The FTSE 100 traded about 0.3% lower on Tuesday, outperforming its European peers as gains in the mining and energy sector capped further losses. Education publisher Pearson was down 3% after it said its decade old online learning partnership with Arizona State University will end next year.On Monday, the World Bank cut its annual global growth forecast for 2022 to 3.2% from 4.1%, amid Russia’s invasion of Ukraine. Looking ahead, US earnings will continue to roll in with Netflix and Johnson & Johnson among the companies reporting Tuesday. On the corporate front, a Rolls-Royce design for a small modular nuclear reactor will likely receive UK regulatory approval by mid-2024 and be able to produce grid power by 2029.
The CAC 40 was trading around the 6510 level, down more than 1% from last session’s close. Drags were led primarily by luxury stocks, with Hermes losing 2.6%, Kering 2.2 % and Louis Vuitton 1.6%. Also, cosmetics giant Loreal fell 3.3%, which is due to reveal its quarterly sales after the close.
The FTSE MIB index was 1.4% down to the 24,500 level on Tuesday, extending losses following the four-day weekend .Stellantis led the losses, plunging over 6% after the announcement that the automotive group suspended production in its Russian plant. Consumer discretionary goods also fell steeply, as hawkish comments by Fed policymaker James Bullard more than offset the PBoC rate cut that took place over the weekend. Both Moncler and Ferrari shares traded 2.5% down. Banking shares also dropped, led by 6% decline for Banca Mediolanum and 4% drop for UniCredit.
The Ibex 35 was down 0.8% to around 8,630 on Tuesday, in line with its European peers. traders weighed gloomier global growth projections and the prospect of an aggressive Federal Reserve monetary policy tightening, while also keeping an eye on the earnings season. Among single stocks, Solaria lost over 4% after Barclays downgraded the company to "underweight" from "equal weight" and raised its target price to €17.7 from €16.9. Fluidra, Rovi, Amadeus and Ferrovial were also among the worst performers.
