ASX set for sharp fall as Wall Street tumbles; Bitcoin keeps diving


The fear is that China’s strict anti-COVID policies will add more disruptions to worldwide trade and supply chains, while dragging on its economy, which for years was a main driver of global growth.

In the past, Wall Street has been able to remain steady despite similar pressures because of the strong profit growth that companies were producing.

Bitcoin has fallen by nearly 30 per cent since the start of April. Credit:Bloomberg/Moe Zoyari

But this most recent earnings reporting season for big US companies has yielded less enthusiasm. Companies overall are reporting bigger profits for the latest quarter than expected, as is usually the case. But discouraging signs for future growth have been plentiful.

The number of companies citing “weak demand” in their conference calls following earnings reports jumped to the highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a BofA Global Research report. Tech earnings are also lagging, she said.

The tech sector is the largest in the S&P 500 by market value, giving it additional weight for the market’s movements. Many tech-oriented companies saw profits boom through the pandemic as people looked for new ways to work and entertain themselves while locked down at home. But slowdowns in their profit growth leave their stocks vulnerable after their prices shot so high on expectations of continued gains.

The higher interest rates engineered by the Fed are also hitting their stock prices particularly hard because they’re seen as some of the market’s most expensive. The Nasdaq composite’s loss of roughly 25 per cent for 2022 so far is much sharper than that for other indexes.

Electric automaker Rivian Automotive slumped 20.9 per cent Monday as restrictions expire that prevented some big investors from selling their shares following its stock market debut six months ago. It’s lost more than three quarters of its value so far this year.

The yield on the 10-year Treasury has shot to its highest level since 2018 as inflation and expectations for Fed action rose. It moderated Monday, dipping to 3.09 per cent from 3.12 per cent late Friday. But it’s still more than double the 1.51 per cent level where it started the year.

In Asian stock markets, Japan’s Nikkei 225 fell 2.5 per cent, and South Korea’s Kospi lost 1.3 per cent. Stocks in Shanghai inched up 0.1 per cent.

In Europe, France’s CAC 40 fell 2.8 per cent, and Germany’s DAX lost 2.1 per cent. London’s FTSE 100 slid 2.3 per cent.

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Apart from concerns about inflation and coronavirus restrictions, the war in Ukraine is still a major cause for uncertainty. More than 60 people were feared dead after a Russian bomb flattened a school being used as a shelter, Ukrainian officials said. Moscow’s forces pressed their attack on defenders inside Mariupol’s steel plant in an apparent race to capture the city ahead of Russia’s Victory Day holiday Monday.

Even the energy sector, a star performer in recent weeks, was under pressure Monday. Benchmark US crude fell 6.3 per cent to $US102.87 per barrel, though it’s still up about 40 per cent this year. Brent crude, the international standard, fell 6 per cent $US105.64 a barrel.

AP



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