Reuters :Wall Street drops as shrinking economy brings recession closer

Jul 28, 2022

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* U.S. economy contracts again in second quarter

* Meta Platforms revenue drops for first time

* Qualcomm flags weak smartphone demand

* Indexes down: Dow 0.38%, S&P 0.38%, Nasdaq 0.70% (Updates to open)

By Shreyashi Sanyal and Aniruddha Ghosh

July 28 (Reuters) – U.S. stock indexes fell on Thursday weighed down by gloomy forecasts from Meta and Qualcomm, while an early reading showed the U.S. economy contracted again in the second quarter adding to fears the economy was already in recession.

Fears of runaway inflation and aggressive monetary policy tightening biting into economic growth have spooked markets, after gross domestic product fell at a 0.9% annualized rate last quarter, the Commerce Department said in its advance GDP estimate.

A Reuters survey of economists showed GDP growth likely rebounded at a 0.5% annualized rate last quarter.

“Today’s reading only adds fuel to the fire that we are in or entering a recession,” said Mike Loewengart, managing director at E*Trade from Morgan Stanley.

“While it is certainly on the negative side of estimates, keep in mind that a 1% decrease is relatively small and supports the idea that any recessionary environment will be mild.”

Two consecutive quarters of declines in growth are traditionally considered a recession, but the private research group that is the official arbiter of U.S. recessions looks at a broad range of indicators instead, including jobs and spending.

Worries of a recession hit Meta Platforms Inc META.O shares, which fell 7.6% after posting its first-ever quarterly drop in revenue.

Qualcomm Inc QCOM.O fell 5.3% after it warned that difficult economic conditions and a slowdown in smartphone demand could hit its mainstay handset chips business.

Shares of Apple Inc AAPL.O fell 0.7%, while Amazon.com Inc AMZN.O shed 1.4% ahead of their quarterly reports after market close.

The Nasdaq .IXIC clocked its biggest daily percentage gain since April 2020 on Wednesday after the U.S. Federal Reserve raised interest rates as expected and comments by Fed Chairman Jerome Powell eased some investor worries about the pace of rate hikes.

The U.S. central bank’s tightening cycle has hammered mega-cap stocks as future cash flows, on which valuations of these companies rest, are discounted heavily when rates rise.

At 10:00 a.m. ET the Dow Jones Industrial Average .DJI was down 121.60 points, or 0.38%, at 32,075.99, the S&P 500 .SPX was down 15.35 points, or 0.38%, at 4,008.26, and the Nasdaq Composite .IXIC was down 84.78 points, or 0.70%, at 11,947.64.

Defensive sectors, including S&P 500 utilities .SPLRCU and real estate .SPLRCR gained over 1% each in early trading, pointing to a largely risk-off day.

Ford Motor Co F.N gained 3.5% after reporting a better-than-expected quarterly net income.

Advancing issues outnumbered decliners for a 1.30-to-1 ratio on the NYSE, while declining issues outnumbered advancers for a 1.33-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 30 new lows, while the Nasdaq recorded 38 new highs and 41 new lows.
Reporting by Aniruddha Ghosh and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta

Link :

https://www.xmglobal.com/research/markets/allNews/reuters/wall-street-drops-as-shrinking-economy-brings-recession-closer-49509602

Reuters

Rate hike lifts S. Africa’s rand; CEE FX weaker as ECB verdict buoys euro

Jul 21, 2022 at 2:52 pm GMT


* Turkish cenbank holds rate at 14% despite near 80% inflation

* Rouble sinks ahead of expected rate cut

* South Africa raises main lending rate more than forecast

By Anisha Sircar

July 21 (Reuters) – South Africa’s rand jumped against the dollar on Thursday after a larger-than-expected rate hike by the central bank, while central and eastern European currencies were hit by a stronger euro following the European Central Bank’s first rate rise in over a decade.

The South African Reserve Bank (SARB) raised its main lending rate ZAREPO=ECI by 75 basis points (bps) to 5.50%, compared to predictions of a 50 bps hike, in the bank’s fifth consecutive increase as it tries to keep a lid on inflation.

The languishing rand ZAR= jumped 0.7%, reversing losses of 0.5% from earlier in the day.

“We will likely see the terminal repo rate level get to 6.5%, so there will be quite a bit more tightening in the cycle to come – inflation expectations have started drifting higher, which is what the SARB is concerned about,” said Miyelani Maluleke, macroeconomist at Absa Corporate and Investment Banking.

The yield on the government’s benchmark 2030 bond ZAR2030= rose as much as 1.1 bps following the decision.

Turkey’s lira TRY= continued to hover near December lows, last trading at 17.69 to the dollar, after its central bank stood pat on policy for a seventh straight month.

“Investors’ main hope for a policymaking shift lies in elections due mid-2023,” said Jason Tuvey, senior emerging markets economist at Capital Economics.

“Turkey’s external position remains dire. A wide current account deficit, large short-term external debts and perilously low foreign exchange reserves leave the lira vulnerable.”

The euro rose as much as 0.8% after the ECB delivered a 50 bps rate hike, its first increase since 2011 as it joined global peers in bumping up borrowing costs. Hungary’s forint EURHUF= and the Czech crown EURCZK= were up to 0.2% weaker.

Meanwhile, the Russian rouble RUBUTSTN=MCX fell sharply against the dollar, slipping below 58 ahead of an expected rate cut by its central bank on Friday.

Aggressive monetary tightening and fears of a recession have sent investors scurrying to safer assets such as the dollar, piling further pressure on emerging assets.

Latin American currencies have also weakened this month, with Colombia’s peso COP= leading the way with a decline of 6% so far in July as prices of its top export, crude oil, come under pressure from worries of weaker energy demand and tighter supply resulting from Russia’s war on Ukraine.

Elsewhere in the region, Brazil’s federal tax revenue in June rose 17.96% year-on-year to a record level, official figures showed, boosted by increases in corporate income taxes and oil royalties.

Key Latin American stock indexes and currencies at 1440 GMT:

Stock indexes

Latest

Daily % change MSCI Emerging Markets

988.36

0.18 .MSCIEF

MSCI LatAm

1941.62

-1.86 .MILA00000PUS

Brazil Bovespa

97478.05

-0.82 .BVSP

Mexico IPC

46864.54

-0.57 .MXX

Chile IPSA

5149.10

0.06 .SPIPSA

Argentina MerVal

106611.25

-0.316 .MERV

Colombia COLCAP

1300.05

-0.23 .COLCAP

Currencies

Latest

Daily % change Brazil real

5.4883

-0.53 BRBY

Mexico peso

20.6358

-0.50 MXN=D2

Chile peso

930.7

-0.52 CLP=CL

Colombia peso COP=

4374.25

-0.69

Peru sol

3.887

-0.25 PEN=PE

Argentina peso

129.5900

-0.15 (interbank) ARS=RASL

Argentina peso

319

-0.63 (parallel) ARSB=



Reporting by Anisha Sircar in Bengaluru
Editing by Mark Potter

XM NEWS

Reuters

Australia’s central bank says rate rises needed to stop inflationary cycle

Jul 19, 2022 at 11:13 pm GMT

SYDNEY, July 20 (Reuters) – Australia’s top central banker on Wednesday reiterated that further interest rates rises would be needed to stop an inflationary cycle developing, as the bank faces the first independent inquiry into its operations since the 1990s.

In a speech at a business conference in Melbourne, Reserve Bank of Australia (RBA) Governor Philip Lowe said it was crucial that high inflation not feed through to business and household expectations. He suggested rates might need to rise to a neutral level of at least 2.5%, from the current 1.35%.

The warning comes as the newly elected Labor government released details of a long-planned review of the central bank looking into its Board structure, operations and methods of communications with the public.
Reporting by Wayne Cole; Editing by Himani Sarkar

Link below:

https://www.xmglobal.com/research/markets/allNews/reuters/australias-central-bank-says-rate-rises-needed-to-stop-inflationary-cycle-49345850

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Posted on July 15, 2022 at 9:02 am GMT.

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