Bets that robust earnings can help investors weather this year’s turbulence were thrown in doubt after US consumer titans signaled growing impact of high inflation on margins and consumer spending. Meanwhile, Federal Reserve officials reaffirmed that tighter monetary policy lies ahead, and investors fretted over stagflation risks.
May 19, 2022 / 02:17 PM IST
People walk past a display showing the Hang Seng Index in Hong Kong on April 22, 2022. Photographer: Isaac Lawrence/AFP/Getty Images
The rout that erased $ 1.5 trillion of market value from US equities yesterday deepened on Thursday, with European shares tumbling and American index futures signaling more losses ahead amid growing concern that high inflation is cutting into corporate performance.
Bets that robust earnings can help investors weather this year’s turbulence were thrown in doubt after US consumer titans signaled growing impact of high inflation on margins and consumer spending. Meanwhile, Federal Reserve officials reaffirmed that tighter monetary policy lies ahead, and investors fretted over stagflation risks.
“We are pricing in a growth scare,” Lori Calvasina, the head of US equity strategy at RBC Capital Markets, told Bloomberg TV. “There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it’s going to be another near-death experience.”
Stocks of retailers and consumer-discretionary companies posted some of the biggest losses in Asia and Europe, after US investors questioned the lofty valuations of companies like Target Corp. in the backdrop of rising interest rates.
In China, Tencent Holdings Ltd. plunged after warning it will take time for Beijing to act on promises to prop up the Chinese tech sector.
What damage will be done to the US economy and global markets before the Fed changes tack and eases policy again? The “Fed Put” is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
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