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Brazil’s services activity beats forecasts with 1.7% rise in March

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© Reuters. Customers sit in chairs at the tables arranged for maintaining social distance between guests at a dining room of a restaurant, as the city eases the restrictions imposed to control the spread of the coronavirus disease (COVID-19) in Sao Paulo, Brazil Jul

By Marcela Ayres

BRASILIA (Reuters) – Services activity in Brazil rose more than expected in March and at a record pace for the month, official figures showed on Thursday, marking a strong recovery from the severe downturn caused by the COVID pandemic.

Services activity increased 1.7% in March from February, more than double the 0.7% growth expected by economists according to a Reuters poll, reaching its highest level since May 2015, the government statistics agency IBGE reported.

That put the sector 7.2% above the level of February 2020, before the onset of the pandemic. All five activities surveyed in the sector expanded, with the biggest increases seen in transport at +2.7% and information and communication services at +1.7%, IBGE said.

Services activity gained 11.4% from March 2021, also above the 8.5% increase forecast in the Reuters poll.

In the first quarter, it grew 9.4% over the same period last year, rising 1.8% over the previous quarter.

Research manager Rodrigo Lobo said the weak comparison base pushed the sector higher, noting that Brazil in March 2021 faced a second wave of COVID-19 that imposed strict restrictions on mobility.

“That’s why in March, in the year-over-year comparison, there are very high rates for activities like air transport, for example,” he said.

Brazil’s Economy Ministry has argued that the performance of the services sector will support the economy this year, along with a stronger labor market and increased private investment, helping to mitigate the effects of high interest rates to battle double-digit inflation.

Economy

Oh Snap! Social media stocks lose billions after Snapchat parent warning

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© Reuters. FILE PHOTO: A woman stands in front of the logo of Snap Inc on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson

By Nivedita Balu and Medha Singh

(Reuters) – Snap Inc (NYSE:SNAP) shares plunged more than 40% and sparked a sector-wide selloff on Tuesday after a profit warning from the Snapchat parent signaled tough times ahead for the once-booming digital ad industry.

The company was on track to lose $15 billion in market capitalization, while shares of major online advertisers and social-media firms were set to lose a combine $200 billion in value from the rout.

Meta Platforms, Pinterest (NYSE:PINS), Twitter (NYSE:TWTR) and Google-parent Alphabet (NASDAQ:GOOGL) were all down between 7% and 24%.

Snap said on Monday it was expecting to miss quarterly revenue and profit targets set just a month earlier and would have to slow hiring and lower spending.

The bleak view from one of the sector’s well-known names underlines the impact of the Ukraine war, surging inflation and rising interest rates on social media companies just when they were trying to shake off the hit from changes to Apple (NASDAQ:AAPL)’s iOS operating system.

“Snap is a proxy for online advertising and when you see weakness there then you automatically think Facebook (NASDAQ:FB), Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC.

“Once you start thinking about Google, that’s when the markets starts to sell off.”

Tuesday’s selloff comes days after a Bank of America (NYSE:BAC) fund managers survey indicated investors are becoming increasingly bearish on tech stocks, a stark reversal to a bullish trend in the past 14 years.

Snap shares were trading at $13.3, lower than their 2017 IPO price of $17.

Analysts said Snap’s outlook for core profit suggested expenses will outpace its revenue growth, given headcount was up 52% in the prior quarter.

“There’s a lot to deal with in the macro environment today,” Chief Executive Officer Evan Spiegel said at a tech conference on Monday.

GRAPHIC: Digital advertising stocks this year (https://graphics.reuters.com/DIGITAL%20ADVERTISING-STOCKS/dwpkrnzogvm/Digital%20advertising%20stocks%20this%20year.png) cb55bba9-860d-4771-9546-5eaef7b68cf01

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As Fed amps up inflation fight, one policymaker urges caution

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© Reuters. FILE PHOTO: President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks at a European Financial Forum event in Dublin, Ireland February 13, 2019. REUTERS/Clodagh Kilcoyne

(Reuters) – With the Federal Reserve amping up its fight against 40-year high inflation, one U.S. central banker this week urged caution so as to avoid triggering “significant economic dislocation” with interest-rate hikes that were too sharp.

“As we expeditiously return monetary policy to a more neutral stance to get inflation closer to our 2 percent target, I plan to proceed with intention and without recklessness,” Atlanta Fed President Raphael Bostic said in an essay released Tuesday on the bank’s website.

The essay set out in written form what he had laid out in an appearance on Monday: the case for raising interest rates by another half of a percentage point at each of the Fed’s next two meetings, as Fed Chair Jerome Powell has signaled, but then to pause on rate hikes in September to see the effects of tighter policy on the economy and inflation.

Monetary policymakers must be “mindful” of the uncertain effects of the pandemic, the war in Ukraine and supply constraints on the economic outlook, and “proceed carefully in tightening policy,” Bostic wrote.

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Stocks slump on growth concerns, bond yields slip

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© Reuters. FILE PHOTO: Men wearing protective face masks walk under an electronic board showing Japan’s Nikkei share average inside a conference hall, amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 25, 2022. REUTERS/Issei Kato

2/2

By Herbert Lash and Lawrence White

NEW YORK/LONDON (Reuters) – Shares slid worldwide on Tuesday as supply chain woes and surging costs hurt corporate earnings and slowed manufacturing output, while Treasury yields dipped as the weakness in equities revived a safe-haven bid for U.S. government debt.

U.S. and euro zone business activity slowed in May, with S&P Global (NYSE:SPGI) attributing the decline in its U.S. Composite PMI Output to “elevated inflationary pressures, a further deterioration in supplier delivery times and weaker demand growth.”

Higher costs from surging freight and raw material prices led Abercrombie & Fitch Co to say it will continue facing headwinds until at least year-end, a day after Snapchat parent Snap Inc (NYSE:SNAP) said the U.S. economy had worsened faster than expected in April.

A two-day relief rally in equities was snuffed out as investors took note of sliding corporate profits on persistent supply chain issues, worsened by the Ukraine war, and soaring inflation that has forced consumers to cut discretionary spending.

The U.S. economy likely faces a sharp slowdown as the Federal Reserve hikes interest rates to stamp out inflation, according to David Petrosinelli, a senior trader at InspereX.

“It’s really all about a hard landing and the Fed really being boxed in the corner with only demand-side tools to help,” Petrosinelli said. “They really need to squash demand.

“This is going to have a ripple effect for the economy, which is why you’re seeing the price action in stocks and bonds,” he said.

MSCI’s gauge of stocks across the globe shed 1.69%, while the pan-European STOXX 600 index lost 0.99%.

On Wall Street, the Dow Jones Industrial Average fell 1.37%, the Nasdaq Composite dropped 3.33% and the S&P 500 lost 2.16% as it again headed toward a bear market.

Shares of Snap plummeted 41.1%, dragging down several social media and internet stocks, while Abercrombie fell 29%.

In Europe, utilities and commodity-linked stocks led declines but banking shares rose.

European Central Bank Chief Christine Lagarde said she saw the ECB’s deposit rate at zero or “slightly above” by the end of September, implying an increase of at least 50 basis points from its current level.

The comments came a day after Lagarde accelerated a policy turnaround that has seen her go from all but ruling out a move this year to penciling in several hikes.

“It has raised jitters in global markets about the possibility at least of a more aggressive move by the ECB,” said Phil Shaw, chief economist at Investec in London.

“There were reports overnight that some hawks on the governing council thought her comments yesterday seemed to rule out a 50-basis-point hike, but her remarks today appeared to leave that on the table,” he said.

Germany’s 10-year Bund yield fell 7.3 basis points to 0.951%.

Treasury yields fell to one-month lows as those on benchmark 10-year Treasury notes fell 13 basis points to 2.729%.

The dollar index fell 0.343%, with the euro up 0.38% to $1.073.

Lagarde’s comments in a blog post on Monday and a swing that drove the U.S. currency to two-decade highs reinforced tactical weakness in the dollar, said Bipan Rai, North America head of FX Strategy at CIBC Capital Markets.

“The broader macro backdrop still supports the risk-off take,” Rai said. “The dollar still has more room to run over the medium term.”

DISAPPOINTING DATA

Markets took some comfort from U.S. President Joe Biden’s comment on Monday that he was considering easing tariffs on China, and from Beijing’s continuing promises of stimulus.

Unfortunately, China’s zero-COVID-19 policy and its lockdowns have already done considerable economic damage.

JPMorgan (NYSE:JPM) cut its forecast for second-quarter Chinese gross domestic product to -5.4% from a prior -1.5% after disappointing data in April. On an annualized basis, its global forecast for the quarter is 0.6%, the weakest since the great financial crisis outside of 2020.

U.S. crude oil recently fell 0.05% to $110.23 per barrel and Brent was at $113.76, up 0.3% on the day.

Spot gold added 0.8% to $1,867.57 an ounce.

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