Agitating ECB, 25% Facebook plunge reboot global selloff

By Marc Jones

LONDON (Reuters) – Global markets suffered a fresh wave of selling on Thursday as Europe’s top central banks reacted to growing inflation pressures and as a downbeat status update from Facebook parent Meta sent social media stocks sprawling.

Wall Street opened with the Nasdaq and S&P 500 tumbling 2.5% and 1.5% respectively as a near 25% plunge in Facebook’s shares vaporised $200 billion of its market value in early trading. [.N]

Europe’s main bourses fell 1.3%[.EU], having already been sapped by the Bank of England’s second rate hike in three months and signals that the European Central Bank (ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB) is now heading towards its first increase in a decade.

The defensive mood had briefly allowed the dollar to regain its footing, but hawkish comments from ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB chief Christine Lagarde that inflation risks now needed to be taken seriously fired the euro upwards and drove euro zone bond markets lower. [/FRX][GVD/EUR]

“The situation has changed,” Lagarde told a news conference referring to inflation. “Clearly what will happen in the next few weeks and what we can see… will be critically important to determine whether the three criteria of our forward guidance are fully satisfied,” she said.

The BoE’s decision to hike its rates to 0.5% had been widely expected amid the global surge in inflation. Just before that, Britain had joined a number of governments around the world in announcing an energy bill subsidy plan, with bills set to shoot up.

U.S. stocks were sharply lower, especially in the tech-dominated Nasdaq after Facebook, Instagram and WhatsApp firm Meta’s disappointing earnings and outlook view caused widespread disappointment.

The social media giant posted a weaker-than-expected revenue forecast, blaming Apple’s privacy changes and increased competition for users from rivals such as TikTok. It also reported 2.91 billion monthly active users in the fourth quarter, showing no growth compared with the previous quarter.

As Meta saw some $200 billion lopped off its market value, other social media companies also fell hard, including Twitter, Pinterest and Spotify. Spotify has also given a disappointing update and has been beset by a row over COVID-19 vaccination misinformation.

“The downgrade in the earnings outlook by Meta and other companies took markets by surprise,” said Kenneth Broux, a strategist at Societe Generale in London.

“The tech selloff spilled over to broader equity markets this morning and with the Fed preparing to raise interest rates, we could see more volatility going forward,” he added.

GRAPHIC – Facebook hits the skids

https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkaylwpx/Pasted%20image%201643890197966.png

50 PERCENT CLUB

Wall Street was also digesting jobless claims data which showed the number of Americans filing new claims for unemployment benefits dropping further, but also a slowdown in service sector activity.

It tees up markets for non-farm payrolls numbers on Friday which are expected to show a 150,000 increase after rising 199,000 in December. The unemployment rate is forecast unchanged at 3.9%, according to a Reuters poll.

In emerging markets, pressure was building on Turkey’s lira again after inflation there came in at nearly 50%. Russia’s rouble also dropped as tensions over Ukraine were fanned by the movement of 3,000 U.S. troops to eastern Europe.

As oil prices eased after OPEC and its allies stuck to a plan to moderately increase output, and after Wednesday’s U.S. ADP jobs data came in weaker than hoped.

Brent crude fell $1, or 1.1%, to $88.43 a barrel. U.S. West Texas Intermediate crude was down $1.2, or 1.4%, at $87.06 a barrel.

“This morning’s dip might be a result of the shockingly low U.S. ADP employment print last night, but we believe the supply squeeze may drive oil prices higher through this year,” said Howie Lee, economist at OCBC in Singapore.

GRAPHIC – Currency markets in 2020

https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjkeypr/Pasted%20image%201643811970966.png

(Additional reporting by Ahmad Ghaddar in London, editing by Ed Osmond, John Stonestreet and Gareth Jones)

By Marc Jones

LONDON (Reuters) – Global markets suffered a fresh wave of selling on Thursday as Europe’s top central banks reacted to growing inflation pressures and as a downbeat status update from Facebook parent Meta sent social media stocks sprawling.

Wall Street opened with the Nasdaq and S&P 500 tumbling 2.5% and 1.5% respectively as a near 25% plunge in Facebook’s shares vaporised $200 billion of its market value in early trading. [.N]

Europe’s main bourses fell 1.3%[.EU], having already been sapped by the Bank of England’s second rate hike in three months and signals that the European Central Bank (ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB) is now heading towards its first increase in a decade.

The defensive mood had briefly allowed the dollar to regain its footing, but hawkish comments from ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-RATES-82f6314e-6203-420b-bc8b-70a978546822>ECB chief Christine Lagarde that inflation risks now needed to be taken seriously fired the euro upwards and drove euro zone bond markets lower. [/FRX][GVD/EUR]

“The situation has changed,” Lagarde told a news conference referring to inflation. “Clearly what will happen in the next few weeks and what we can see… will be critically important to determine whether the three criteria of our forward guidance are fully satisfied,” she said.

The BoE’s decision to hike its rates to 0.5% had been widely expected amid the global surge in inflation. Just before that, Britain had joined a number of governments around the world in announcing an energy bill subsidy plan, with bills set to shoot up.

U.S. stocks were sharply lower, especially in the tech-dominated Nasdaq after Facebook, Instagram and WhatsApp firm Meta’s disappointing earnings and outlook view caused widespread disappointment.

The social media giant posted a weaker-than-expected revenue forecast, blaming Apple’s privacy changes and increased competition for users from rivals such as TikTok. It also reported 2.91 billion monthly active users in the fourth quarter, showing no growth compared with the previous quarter.

As Meta saw some $200 billion lopped off its market value, other social media companies also fell hard, including Twitter, Pinterest and Spotify. Spotify has also given a disappointing update and has been beset by a row over COVID-19 vaccination misinformation.

“The downgrade in the earnings outlook by Meta and other companies took markets by surprise,” said Kenneth Broux, a strategist at Societe Generale in London.

“The tech selloff spilled over to broader equity markets this morning and with the Fed preparing to raise interest rates, we could see more volatility going forward,” he added.

GRAPHIC – Facebook hits the skids

https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkaylwpx/Pasted%20image%201643890197966.png

50 PERCENT CLUB

Wall Street was also digesting jobless claims data which showed the number of Americans filing new claims for unemployment benefits dropping further, but also a slowdown in service sector activity.

It tees up markets for non-farm payrolls numbers on Friday which are expected to show a 150,000 increase after rising 199,000 in December. The unemployment rate is forecast unchanged at 3.9%, according to a Reuters poll.

In emerging markets, pressure was building on Turkey’s lira again after inflation there came in at nearly 50%. Russia’s rouble also dropped as tensions over Ukraine were fanned by the movement of 3,000 U.S. troops to eastern Europe.

As oil prices eased after OPEC and its allies stuck to a plan to moderately increase output, and after Wednesday’s U.S. ADP jobs data came in weaker than hoped.

Brent crude fell $1, or 1.1%, to $88.43 a barrel. U.S. West Texas Intermediate crude was down $1.2, or 1.4%, at $87.06 a barrel.

“This morning’s dip might be a result of the shockingly low U.S. ADP employment print last night, but we believe the supply squeeze may drive oil prices higher through this year,” said Howie Lee, economist at OCBC in Singapore.

GRAPHIC – Currency markets in 2020

https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjkeypr/Pasted%20image%201643811970966.png

(Additional reporting by Ahmad Ghaddar in London, editing by Ed Osmond, John Stonestreet and Gareth Jones)