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Nikkei and Asian stocks start slow as US futures fall

Asian stocks got off to a slow start on Tuesday after a rally on Wall Street was marred by an early drop in U.S. stock futures, while the euro was near one-month highs as ratings faltered. were shrinking on a July rate hike by the ECB.

After finishing stronger on Monday, Nasdaq futures lost 1.3%, with traders blaming a Snap earnings warning that saw the Snapchat owner’s shares fall 28%. Snap is the first of the major tech apps to report and could cast a shadow over Meta Platforms and Facebook-owner Twitter, which will report next week.

S&P 500 futures also lost 0.6%, giving up some of Monday’s 1.8% rebound. As a result, MSCI’s broadest index of Asia-Pacific stocks outside Japan was almost unchanged, while Japan’s Nikkei fell 0.1%. Markets were somewhat reassured by US President Joe Biden’s comment that he was considering easing sanctions on China, and Beijing’s continued stimulus promises.

Unfortunately, China’s zero-COVID policy, with the ensuing lockdowns, has already done massive economic damage.

“Following disappointing April activity data, we have again downgraded our forecast for China’s GDP (gross domestic product) and now expect Q2 GDP to contract 5.4% in pace. annualized, down from 1.5% previously,” JPMorgan analysts warned. “Our global growth forecast for the second quarter comes in at just 0.6% annualized, by far the weakest quarter since the global financial crisis outside of 2020.”

The first surveys of European and US manufacturing purchasing managers for May are due out later on Tuesday and could show some slowing in what has been a resilient sector of the global economy.

Analysts also lowered forecasts for the United States as the Federal Reserve looks certain to raise interest rates by one percentage point over the next two months.

The hawkish message is expected to be delivered this week by a host of Fed speakers and the minutes of the final policy meeting scheduled for Wednesday. Yet the European Central Bank is also becoming more hawkish, with President Christine Lagarde surprising many by opening the door to a rate hike as early as July.

That saw the euro climb to $1.06, having rebounded 1.2% overnight in its best session since early March. It is now facing strong chart resistance around $1.07.

The dollar also fell against the pound and a range of currencies, sending the dollar index down 0.9% overnight to 102.100.

Meanwhile, the euro jumped sharply to 136.56 Japanese yen, while the dollar was flat at 127.77 yen. The weaker dollar helped gold regain ground to $1,853 an ounce.

Oil prices were caught between worries about a possible global slowdown and the prospect of higher fuel demand from the U.S. summer driving season and Shanghai’s plans to reopen after a two-month lockdown against coronaviruses.

U.S. crude fell 59 cents to $109.70, while Brent fell 60 cents to $112.82.

First post: STI

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