European, Asian markets sink at open in global selloff

AFP , Thursday 19 May 2022

Europe's main stock markets opened sharply lower Thursday, after heavy losses in Asia and on Wall Street.

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headqua
A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, May 19, 2022. Shares dropped sharply in Asia on Thursday after a broad retreat on Wall Street triggered by dismal results from major retailer Target that renewed worries over the impact of high inflation. AP

London's benchmark FTSE 100 index of major blue-chip companies fell 0.8 percent to 7,376.16 points compared with Wednesday's close.

In the eurozone, Frankfurt's DAX index lost 1.5 percent to 13,800.02 points and the Paris CAC 40 shed 1.4 percent to 6,262.72.

"Sentiment ... is highly negative as traders and investors are largely concerned about an economic downturn and soaring inflation," said AvaTrade analyst Naeem Aslam.

Downcast earnings reports from retailers had also exacerbated worries about consumer resilience and corporate profitability on Wednesday.

Asian Markets

Asian markets posted losses Thursday, after Wall Street suffered one of its worst batterings in two years in the previous session.

Downcast earnings reports from retailers had exacerbated worries about consumer resilience and corporate profitability Wednesday, sparking a rough day's trade.

By Thursday afternoon, Hong Kong was down by more than two percent, while Tokyo closed down by 1.89 percent.

Among the biggest losers in Hong Kong were Chinese tech giants, after Tencent reported lacklustre profits, fuelling wider concerns for a grim earnings season as China's economic outlook worsens.

Tencent shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.

Alibaba dropped more than six percent, while Baidu and Xiaomi were both down.

Elsewhere in the region, Australia posted its lowest jobless rate in 48 years, in a potential boost to Prime Minister Scott Morrison two days ahead of tightly contested federal elections.

The unemployment rate dipped to 3.9 percent, the official statistics body said, the lowest rate since 1974.

But stocks in Sydney were still down, as were those in Singapore, Seoul and Taipei.

Jakarta and Shanghai eked out small gains.

Stephen Innes at SPI Asset Management called Wednesday's losses "the most significant daily decline since June 2020".

"The weakness came as Target's quarterly earnings added fuel to the recession risk narrative," he added.

Target, the North American-focused big-box retailer, plunged around 25 percent after earnings missed expectations despite higher sales.

The company pointed to the hit from higher operating costs in results that echoed those of bigger rival Walmart.

The retailers said profits were under pressure and some consumers were avoiding discretionary purchases as prices for food, gasoline and other household staples rise.

All three major US indices dove, with the Dow sinking more than 1,150 points or 3.6 percent, and the Nasdaq plunging 4.7 percent.

European bourses were also down.

"The big falls in shares of these retails... highlights the damage inflation is inflicting on the sector's profit margins," said Fawad Razaqzada at City Index.

"What's more, consumers are getting squeezed as well and if they now start to cut back on spending then retailers could suffer even further," he added.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank would raise interest rates until there is "clear and convincing" evidence that inflation is in retreat.

"We've had investors for the most part who've lived through three or four decades of declining interest rates, rising multiples for equities and strong earnings for the most part," Christopher Smart, chief global strategist at Barings LLC, told Bloomberg Television.

"Now you're entering a very new phase where we're not really quite sure where inflation is going to level off."

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