Asian, European markets drop after Wall St battering

Markets in Europe and Asia posted losses Thursday, after Wall Street suffered one of its worst batterings in two years.

Downcast earnings reports from retailers had exacerbated worries about consumer resilience and corporate profitability Wednesday, sparking a rough day’s trade.

Hong Kong slumped 2.5 per cent, while Tokyo closed down by 1.89 per cent.

Among the biggest losers in Hong Kong were Chinese tech giants after Tencent reported lacklustre profits, fuelling wider concerns for a grim earnings season as China’s economic outlook worsens.

Tencent plunged more than eight per cent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.

Alibaba dropped more than six per cent, while Baidu and Xiaomi were also down.

Elsewhere in the region, Australia posted its lowest jobless rate in 48 years, in a potential boost to Prime Minister Scott Morrison two days ahead of a tightly contested federal election.

The unemployment rate dipped to 3.9 per cent, the official statistics body said, the lowest rate since 1974.

But stocks in Sydney were still down, as were those in Singapore, Seoul and Taipei.

Jakarta and Shanghai eked out small gains.

Europe’s main stock markets opened lower too. London’s benchmark FTSE 100 index fell 0.8 per cent, while Frankfurt lost 1.5 per cent and Paris shed 1.4 per cent.

Retailer woes

“Sentiment... is highly negative as traders and investors are largely concerned about an economic downturn and soaring inflation,” said AvaTrade analyst Naeem Aslam.

Stephen Innes at SPI Asset Management called Wednesday’s losses “the most significant daily decline since June 2020”.

“The weakness came as Target’s quarterly earnings added fuel to the recession risk narrative,” he added.

Target, the North American-focused big-box retailer, plunged around 25 per cent after earnings missed expectations despite higher sales.

The company pointed to the hit from higher operating costs in results that echoed those of bigger rival Walmart.

The retailers said profits were under pressure and some consumers were avoiding discretionary purchases as prices for food, gasoline and other household staples rise.

All three major US indices dove Wednesday, with the Dow sinking 3.6 per cent and the Nasdaq plunging 4.7 per cent.

“The big falls in shares of these retails... highlights the damage inflation is inflicting on the sector’s profit margins,” said Fawad Razaqzada at City Index.

“What’s more, consumers are getting squeezed as well and if they now start to cut back on spending then retailers could suffer even further.”

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank would raise interest rates until there is “clear and convincing” evidence that inflation is in retreat.