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Stock markets fall over renewed growth and inflation concerns

Global stock markets dropped on Tuesday as downbeat surveys on business confidence and weak earnings from social media group Snap and retailer Best Buy intensified concerns about the global growth outlook.

On Wall Street, futures contracts tracking the technology-heavy Nasdaq 100 share index dropped 1.7 per cent, while those tracking the S&P 500 — which bounced almost 2 per cent higher on Monday following seven consecutive weeks of losses — lost 1 per cent.

Investors’ nerves were rattled after Snap said late on Monday that the macroeconomic environment “has deteriorated further and faster than anticipated” since it issued guidance in April. Shares in the Snapchat parent, one of a group of social media businesses that soared during coronavirus lockdowns, dropped a third in pre-market dealings.

Facebook owner Meta was down 8 per cent in pre-market trading. Twitter dropped 4 per cent and Pinterest fell 14 per cent. Google parent Alphabet fell almost 5 per cent.

On Tuesday, Best Buy joined other leading US retailers in cutting its full-year earnings forecast, despite the electronics chain reporting better than expected sales.

“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”.

Meanwhile, inflation fears intensified on Thursday after closely watched purchasing managers’ indices highlighted how businesses were struggling with higher costs.

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 PMI 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.

“What we see in these PMIs is that, with supply chain issues and inflation, nothing is yet fixed,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management. China’s lockdowns and the Ukraine war, he added, were “feeding inflation in the US and Europe and that’s not going to stop anytime soon”.

Europe’s regional Stoxx 600 share index, which has lost more than a tenth so far this year, fell 0.5 per cent. Hong Kong’s Hang Seng share index closed 1.8 per cent lower and the Nikkei in Tokyo lost 0.9 per cent.

In another sign of growth jitters, the yield on the 10-year US Treasury note, which moves inversely to the price of the benchmark debt security, fell 0.03 percentage points to 2.83 per cent as traders bought up the low-risk asset. Germany’s equivalent Bund yield traded flat at 1.02 per cent.

In currencies, sterling dropped 0.9 per cent against the dollar to $1.25 after the PMI survey for the UK showed activity in the nation’s manufacturing and services businesses slowed to the lowest rates in more than a year.

Brent crude, the worldwide oil benchmark, added 0.2 per cent to $113.66 a barrel.

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