Stock markets retreat on weak global growth worries

A profit warning by Snapchat's owner spooked the markets. ©AFP

London (AFP) - Stock markets mostly retreated Tuesday on renewed concerns over weak global growth, with a profit warning from the owner of Snapchat spooking investors and further shocking the tech sector.

It comes amid concerns over the impact of China's Covid-19 restrictions on the world's second-largest economy after the United States.

Monday's strong Wall Street rally, where the Dow closed up two percent, did not carry over into Asian and European trading, and US stock indices pulled back at the opening bell on Tuesday.

Snap, the parent of social media app Snapchat, saw its share price slump 36 percent as trading began on Wall Street.

"Snap provided a shock," noted Neil Wilson, chief market analyst at Markets.com.

The company "spooked the market with a macroeconomic warning that dented tech the most and pointed to earnings revisions that could drag the market lower for longer", he added.

The tech-heavy Nasdaq Composite quickly sank more than two percent.

Patrick J. O'Hare at Briefing.com said that Snap's warning impacted the broader market as investors are worried about the economic trajectory.

"The real issue hitting the market in terms of the Snap warning is the context for the warning: 'the macroeconomic environment has deteriorated further and faster than anticipated,'" he said.

The biggest faller in London Tuesday was however energy group SSE, whose share price dived 6.7 percent on reports that the UK government may impose a windfall tax on excess profits enjoyed by electricity producers.

Prime Minister Boris Johnson has so far indicated he does not want to impose such a tax on oil and gas producers despite them also earning vast sums as prices soar.

Johnson argues an exceptional levy on the likes of BP and Shell would harm their efforts to invest in greener fuels like solar and wind power.

In China, Beijing's announcement Monday of a fresh raft of measures to stimulate the economy did little to calm investors' nerves.

China's economy has taken a hit from Beijing's zero-Covid approach to the pandemic, which has resulted in lengthy lockdowns of major cities and mass testing of millions of people.

Prolonged virus lockdowns have constricted supply chains, dampened demand and stalled manufacturing.

Investment banks UBS Group and JPMorgan Chase have responded by cutting their China economic growth forecasts.

"The lingering restrictions and lack of clarity on an exit strategy from the current Covid policy will likely dampen corporate and consumer confidence and hinder the release of pent-up demand," UBS economists including Tao Wang wrote in a research note.

Concerns over the Chinese economy and its impact on oil demand weighed on crude prices Tuesday.