US stock futures pointed to further selling after Wall Street equities posted their worst day since early in the pandemic, as a string of disappointing corporate earnings reports added to fears that global growth is slowing.
S&P 500 futures fell 1.5 per cent in early Chicago trading on Thursday after the blue-chip barometer shed 4 per cent in its worst sell-off since June 2020. European and Asian shares also took a knock, with the Stoxx Europe 600 sliding 2.4 per cent and MSCI’s Asia-Pacific index falling 1.8 per cent.
Thursday’s declines leave the broad FTSE All-World share index down 18 per cent this year, putting it on track for the worst annual performance since the depths of the financial crisis in 2008.
The latest market tumult comes amid mounting concern that global growth is slowing just as central banks rapidly unwind the stimulus measures that have helped prop up the world economy over the past two years.
Cisco Systems late on Wednesday cut its full-year profit guidance. The networking equipment company said the war in Ukraine and lockdowns in China had knocked its sales. The group’s shares fell 13 per cent in pre-market trading on Thursday, shaving $27bn off its market value.
“This is more than just a continuation of the sell-off [from recent weeks],” said Mohamed El-Erian, FT columnist and chief economic adviser at Allianz. “It’s not just about inflation and interest rates but we also had threats to earnings and growth.”
Poor results earlier this week from US retailers Target and Walmart have also added to the growth worries, El-Erian said. Target led the declines on Wednesday, plunging 25 per cent after warning that its profit margins were under pressure from surging input costs, a day after its larger rival Walmart issued a similar alert. Both retailers have notched their worst daily stock falls since 1987 this week.
“Growth fears have taken over the market, which is pricing a higher chance of recession at this stage . . . it’s difficult to get positive,” said Jeremy Gatto, an investment manager at Unigestion.
In Europe, the selling on Thursday was broad with every major sector down and around 90 per cent of the stocks included in the Stoxx 600 gauge down. Consumer-focused groups faced the heaviest selling pressure.
Despite the bearish sentiment, some analysts said markets were pricing in too much recession risk.
“A recession is not inevitable, but clients constantly ask what to expect from equities in the event of a recession,” said David Kostin, chief US equity strategist at Goldman Sachs, adding that the Wall Street bank forecasts a roughly one-in-three chance of a US recession in the next two years.
In Asia, Hong Kong-listed shares in Chinese internet group Tencent fell 6.5 per cent, helping to drag the Hang Seng Tech index down 4 per cent and the broader Hang Seng index 2.5 per cent lower.
Tencent’s fall came after the Chinese internet group reported its slowest revenue growth on record. The company recorded a 51 per cent drop in profits in the first quarter because of Beijing’s crackdown on the tech sector and the impact of harsh Covid-19 lockdowns on consumer spending.
Charlie Chai, an analyst with 86 Research, said Tencent’s “fairly underwhelming” results in gaming, advertising and new business services were “a reflection of the big picture [in China]” as a downswing in business confidence translated into reduced corporate spending.
With China’s economic outlook worsening, Standard Chartered cut its annual growth forecast for the world’s second-largest economy to 4.1 per cent from 5 per cent.
Additional reporting by Primrose Riordan in Hong Kong and Naomi Rovnick in London
