HONG KONG: Tuesday saw a decline in most stocks following a Wall Street sell-off fueled by new recession fears in response to news that Apple planned to cut back on spending because of the uncertain economic outlook. The decline in most Asian markets also occurred as oil maintained a Monday surge brought on by dimming hopes that Joe Biden had persuaded Saudi Arabia to increase production in order to ease a supply crisis and stabilise prices.
The losses in the stock market reduced Monday’s gains, which came after a US retail sales report that beat expectations suggested consumers — the main engine of growth — were resilient despite inflation that has reached a decade-high and rising interest rates. Analysts also cautioned that since the earnings season is just getting started, investors may suffer further losses as companies report declining profits or issue dire forecasts.
According to Bloomberg News, tech giant Apple is cutting back on hiring and some investments as a result of worries among large-cap companies about a slowdown or recession in the economy. The announcement comes in the wake of similar cost-cutting measures taken by other Silicon Valley behemoths like Alphabet, Amazon, and Facebook parent Meta.
According to Stephen Innes of SPI Asset Management, “Apple raising their hand and admitting they have too many staff is a clear sign of caution from the mega-cap heavyweight giants amid an uncertain time.” “Investors are looking for a ‘kitchen-sink’ quarter where corporates flush out all the bad news at once, but I’m not sure that will happen, and I think this makes it difficult to put an absolute bottom on the equity selloff,” said the analyst.
All three major indexes ended the day in the red as a result of the report, after spending the majority of the day well up. And on Tuesday, Asia struggled. Tokyo increased as investors there returned, while Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, Wellington, and Manila all decreasedfrom a long weekend to play catch-up with Monday’s regional rally.
As central banks keep raising borrowing costs to combat inflation, Innes continued, markets were likely to experience pressure for a while. This increased risk of an economic downturn was a result.
The likelihood of a recession is the main topic of conversation in the US right now, he added, as inflation may have peaked in June and the Fed still has a couple more significant rate increases to make before possibly pausing. “We always hear that rate hikes are built into the price, but when the market actually sees the reality, especially when they are of the jumbo variety, they always come as a shock.” Despite recent losses, oil prices—the main cause of skyrocketing prices—continue to hold their strength, contrary to predictions that inflation may have peaked.
Assuming Riyadh won’t turn up the pressure any further, both major contracts soared more than 5% on Monday. Biden’s plea appeared to have been ignored. Additionally, traders are nervously watching Europe, where a 10-day maintenance shutdown of the Russian Nord Stream 1 pipeline is set to end.
As retaliation for the sanctions imposed on Moscow for its invasion of Ukraine, many worry that Vladimir Putin will keep it closed.
That could cause crude prices to soar and deal yet another blow to the already fragile eurozone economy. Concerns about a demand hit in China from a potential lockdown in Shanghai are being overshadowed by supply concerns as authorities struggle to contain yet another Covid-19 outbreak.
