Squawk Box Europe Express

The U.S. slaps a raft of fresh sanctions on Russia, targeting the country’s financial sector. We hear from former NATO Secretary-General Anders Fogh Rasmussen who says the West has underestimated Russian President Vladimir Putin on several levels. U.S. and European futures are in the red following last week’s turmoil with fresh inflation data and Fed speak coming this week. In China, export growth slumps to its lowest level in 2 years as Beijing’s zero-Covid approach hits both manufacturing and output.  

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U.S. markets see enormous and abrupt moves following post-Fed gains with the Dow losing more than 1,000 points in its worst session since 2020. The 10-year Treasury bill surges to more than 3 per cent. The dollar strengthens to two-decade highs against various currencies ahead of an expected solid April jobs report. In Asia, tech stocks sell off sharply following last night’s Nasdaq slump – its worst session in 2 years. The BoE gives a pessimistic outlook for the UK economy, saying that price inflation may reach up to 10 per cent this year while interest rates could hit levels not seen since 2009.   

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The Fed follows through on its promise to hike rates by 50 basis points – its biggest move in 22 years. Wall Street is buoyed by Chairman Jerome Powell’s comments to CNBC, playing down talk that the FOMC could move to 75bps. The BoE is expected to make its fourth straight hike of 25bps as UK inflation hovers at a 30-year high. In China, services are hard-hit by Beijing’s continued rolling Covid lockdown measures. April activity was down at its second-steepest level, hurting supply and demand. And in banking news, Société Générale has raised its bad loan provisions relating to Russia which mars its Q1 surge in trading revenue.

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Ride-hailing app Lyft suffers a bumpy ride with a quarter of the company’s value wiped off in extended trade. The Federal Reserve is expected to hike rates by 50bps amid surging inflation and a tight labour market. Billionaire investor Paul Tudor Jones says the central bank’s governors are in “uncharted waters”. Natural gas is up ahead of an expected sixth round of sanctions by the EU on Moscow. This time an oil embargo is potentially on the table. Tesla CEO Elon Musk warns that some commercial and government bodies may be required to pay to use Twitter under his ownership.

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The U.S. ten-year Treasury yield surpasses 3 per cent for the first time in fours years while stocks rally after the S&P 500 and the Nasdaq hit fresh lows for the year. The FOMC meets with expectations of a 50bps hike. Goldman Sachs CEO David Solomon says he believes the U.S. can avoid recession. Germany has said it will withstand a Russian oil embargo as the EU prepares a sixth package of sanctions against Moscow. In banking news, top HSBC stakeholder Ping An reportedly calls for the break-up of the lender while BNP Paribas beats expectations with Q1 profits surging 19 per cent. 

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Nasdaq marks its worst month since 2008 with rising rates and inflation weighing heavily on the tech sector. We hear from Berkshire Hathaway CEO Warren Buffett who says “inflation swindles almost everybody”. The legendary investor is taking large bets on the U.S. markets despite seeing “market mania”. In Asia, stocks slide after Chinese manufacturing hits its lowest level in 2 years with Beijing’s zero-Covid approach taking its toll on the economy. And in Ukraine, House Speaker Nancy Pelosi visits President Volodmyr Zelenskyy.  

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U.S. markets bounce back with the Nasdaq enjoying its best day for a month. However, Apple’s share price drags in extended trade, however, after CEO Tim Cook warns of an $8bn hit due to continuing Covid and supply constraints. Amazon is also in the red after reporting its first quarterly loss in 7 years, weighed down by its stake in EV maker Rivian. CFO Brian Olsavsky says that inflation is here to stay. Elon Musk makes a one-off sale of Tesla stock to help fund his Twitter deal.  

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It’s a big earnings week on both sides of the Atlantic. Facebook parent Meta smashes Q1 expectations with the stock soaring 18 per cent in after-hours trade. However, COO Sheryl Sandberg tells CNBC that the outlook remains challenging. Asia-focused lender Standard Chartered hikes income guidance after a strong start in 2022 but it remains cautious on Covid fallout in China. In foreign exchange news, the dollar hits a 20-year high against the yen after the Bank of Japan resists the urge to raise interest rates. The euro, however, falls to its lowest level against the greenback in five years as Russian gas payment tensions continue throughout the bloc.

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Tech stocks hit a 12-month low, compounding heavy losses for US markets in April and pulling the Nasdaq down to its worst day since September 2020. Meanwhile, Russia appears to come good on its threat to begin using its gas exports as a tool in its war with Ukraine, and standoff with Western allies. Moscow cut off gas supplies to Poland and Bulgaria, in what a top Ukrainian official calls 'the beginning of the gas blackmail of Europe'. And, we are in the thick of earnings season. Credit Suisse announced major changes at the top and reveals adjustments to its executive board, while confirming a first quarter loss and a tough time for client activity. In U.S. tech, a stronger than expected forecast sends shares of Microsoft higher in extended trade, but Alphabet disappoints on declining YouTube revenue. CFO Ruth Porat attributes part of the disappointing quarter to the tech giant's pull-back from Russia.

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Elon Musk’s Twitter bid is successful after the social media group's board approves his 44 billion dollar takeover bid. The acquisition sparked a flurry of speculation over what the future of the platform may hold. The PBOC pledges more economic support, after Chinese equities post their worst day since February 2020, pushing Asian equities higher. HSBC beats expectations despite posting a near 30 percent fall in first quarter profit as Covid and inflation weigh on revenues at Europe's largest lender. CFO Ewen Stevenson tells CNBC that rate normalisation is a bright spot. And, profit at Swiss bank UBS tops forecasts at over 2 billion dollars in the first quarter, as higher trading volumes boost the bottom line, offsetting the impact from its exposure to Russia.

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