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MARKET WRAPS

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Eurozone, Germany, France, UK Flash PMI ; France Business Sentiment Index; UK Public sector finances, CBI Distributive Trades Survey; ECOFIN meeting of EU finance ministers; updates from Siemens Energy, Credit Agricole, Air France-KLM, Prada, HeidelbergCement, Hugo Boss, Swatch, Homeserve, Electrocomponents, Micro Focus, Shell, WPP

Opening Call:

European shares will likely take a hit early Tuesday after an earnings warning by Snap dragged a number of big U.S. tech stocks lower in after-hours trading. In Asia, shares suffered broad losses despite Wall Street's gains Monday; the dollar and gold rose; while Treasury yields and oil dipped.

Equities:

Another U.S. tech warning and continued worries over inflation will likely drag European stocks lower Tuesday.

Asian shares and U.S. futures were also weaker, with safe haven assets back in demand, after Snap lowered its earnings and revenue expectations for the June quarter, citing a rapidly slowing economy.

"The macroeconomic environment has deteriorated further and faster than anticipated," the company said in a filing on Monday. "As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range."

Snap stock fell 31% in after-hours trading following the release and other tech companies with digital advertising exposure fell in reaction: Meta Platforms dropped 7%, while Pinterest fell 12% and Twitter declined 4%.

Read more on the Snap warning.

U.S. stocks finished higher Monday with some analysts crediting the gains to comments made by Joe Biden about the prospect of reducing tariffs on China.

However, significant skepticism remains toward the idea stocks have put in a lasting bottom.

Researchers at BlackRock turned neutral on developed-market stocks like those of the U.S. and said they see no catalyst for a sustained rebound in assets perceived as risky right now.

Jefferies wrote in a note on Monday their analysis suggested "that, despite investor sentiment surveys being quite bearish, there has not been the cathartic selling that would accompany a market bottom."

"If we are correct, then the final part of the earnings momentum cycle is a combination of both earnings cuts and a slice in target prices. Investors should be conservatively positioned," Jefferies wrote.

Forex:

The dollar was back in demand in Asia, as a risk-off mood spurred by losses in U.S. stock futures and most regional equity markets boosted the safe-haven allure of the greenback.

JPMorgan said the dollar has been challenged but it's still expected to smile, referring to the idea that good and bad, but not middling, economic conditions support the currency's strength.

"For FX, the most meaningful change in our view has been a shift in the global growth narrative, which has moved from U.S. exceptionalism to a global slowdown which encompasses the U.S.," JPM said.

"This is meaningful because it informs the relative performance of currencies and the composition of USD strength. Our view in recent months has been bullish on USD in a relatively broad-based way--vs. other reserve currencies where either the central bank was dovish (JPY) or growth challenged (EUR), and vs. vulnerable high beta FX (NZD, GBP)."

Bonds:

Treasurys were in demand early Tuesday after they sold off Monday, but the 10-year yield remained above 2.8%.

Yields have risen sharply in 2022 as investors fret about persistently high inflation and an aggressive response by the Fed.

"A number of Fed and ECB members are scheduled to speak, but the fate for fixed-income markets seems to reside with the equity complex at the moment," wrote economists at UniCredit.

Investors will watch for the FOMC minutes, although much of the Fed's line of thinking has already been baked into asset prices, while key PCE inflation data is also in the radar, coming up Friday.

Energy:

Oil prices were lower in Asian trade after they finished mixed in a choppy session Monday.

There are signs that the EU's proposed ban on Russian oil looks increasingly unlikely, said ANZ. "Hungary has been holding out on the unilateral ban, asking for more time to allow it to find alternative sources."

However, SPI Asset Management reckons the EU embargo is a "when" not an "if" question. "We can't rule out a price spike if an embargo comes at the same time as an uptick in demand from U.S. seasonal effects and as Chinese restrictions ease."

Read: Biden Exploring Release of Diesel Fuel Reserves Amid High Prices

Other News:

Ukrainian officials have descended on Davos to make sure the world doesn't forget about the war while contending with inflation and other challenges, said Andrii Zhupanyn, head of the parliament's subcommittee on gas policy.

On Europe's ongoing reliance on Russian natural gas, Zhupanyn said "something needs to be done." A full embargo on Russian gas in the EU is off the table for now but Ukraine is suggesting alternatives that would deprive Moscow of revenue, Zhupanyn said.

They include a tariff on Russian fuel or a requirement that payments go into an escrow account that cannot be accessed for general purposes--a workaround previously used for purchases of Iranian oil.

Metals:

Gold futures added to Monday's gains which were spurred by the weaker dollar.

"If the dollar continues to weaken, gold should find resistance around the $1,885 level," said OANDA. It added that further stimulus from China and hopes the Fed may ease up on tightening rates should also be positives for bullion.

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Copper prices were lower, weighed by worries that demand could take months to rebound.

Recent consumption run rates imply the metal shifted into a global surplus in April, and that it will probably take some time for the balance to tighten up again, said Citi Research.

Citi remains bearish on copper in the near term and forecasts the LME price to drop to $8,500 a ton over a zero- to three-month horizon.

---

Iron-ore prices edged lower on fragile local sentiment.

Talks the U.S. could lower tariffs on China's exports have surfaced before, said IG, noting President Biden's remarks. However, the lack of any concrete follow-through remains an element of disappointment for markets.

TODAY'S TOP HEADLINES

Fed Officials Weigh Future Rate Policy Shift

Some Federal Reserve officials are starting to talk about a possible shift in the central bank's interest-rate policy.

Federal Reserve Bank of St. Louis President James Bullard, who spoke Friday on the Fox Business Network, and Atlanta Fed President Raphael Bostic, who spoke Monday, both weighed in on the path for rates.

Biden Exploring Release of Diesel Fuel Reserves Amid High Prices

WASHINGTON-The Biden administration is considering a release of diesel fuel from federal reserves to address skyrocketing prices and the threat of supply outages on the East Coast.

Officials have drafted an emergency declaration as prices have soared to record highs in recent weeks, White House spokeswoman Emilie Simons said on Twitter on Monday. Such a declaration would allow for the quick release of some of the 1 million barrels of diesel in the Northeast Home Heating Oil Reserve "if necessary," she said.

At Davos Confab, CEOs Fret Over Economy, Start to Plan for a Downturn

DAVOS, Switzerland-Fears of an economic downturn have lately gathered steam. Corporate executives at the World Economic Forum here struck a mostly gloomy tone to match.

"There is a cycle of mood," said Alex Karp, chief executive of Palantir Technologies Inc. "You walk around and everyone thinks it's going to be bad, so it's going to be bad." Mr. Karp isn't alone, but the pessimism he says he's picking up among other CEOs also isn't uniform.

JPMorgan Says U.S. Consumers Are Doing Just Fine

Recession fears have markets in a panic, but the leaders of America's biggest bank said U.S. consumers appear to be in good financial health.

JPMorgan Chase & Co. expects credit losses to remain abnormally low through much of 2023, because customers haven't yet drained cash balances that grew fatter during the pandemic, executives said at the bank's investor day on Monday.

'Deteriorating quickly': U.S. earnings revisions could knock stocks down another 5% to 10%, warns Morgan Stanley

U.S. company earnings revisions are "deteriorating quickly," threatening to deepen the stock-market's losses so far this year, according to a note from Morgan Stanley's wealth-management division.

"Negative earnings revisions and negative economic surprises could produce another 5% to 10% decline in the S&P 500," said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, in a note Monday. "With the last two years a period of significant 'overearning,' reversion to the mean now makes U.S. earnings revision downgrades the worst among all regions."

Smallpox Vaccine Enters Wider Production Amid Monkeypox Outbreak

Danish vaccine maker Bavarian Nordic A/S is making more of a smallpox vaccine typically stockpiled in case of biological warfare, as governments seek doses that also offer protection against monkeypox amid an unusual outbreak around the world.

Monkeypox, a viral illness that is only rarely detected outside of Africa, has been reported in recent weeks in at least 17 countries including the U.S., U.K., Spain, Portugal and Australia, according to nonprofit data platform Global.health. In the U.S., a case was confirmed in Massachusetts and at least five more are suspected-one each in Florida, New York and Washington and two in Utah, state officials and the Centers for Disease Control and Prevention said Monday.

Siemens Energy Picks a Good Moment to Take Wind Turbines Private

Long-suffering shareholders in Siemens Gamesa Renewable Energy will likely be spared the decision of whether to quit or wait patiently for the renewable-energy revolution.

Shares in Siemens Gamesa Renewable Energy rose 6.2% Monday after its majority shareholder, Siemens Energy, on Saturday confirmed longstanding expectations that it wanted to take the wind-turbine business private. It said it would pay EUR18.05 a share, equivalent to $19.25, for the outstanding 32.9% of its subsidiary. Cost and revenue synergies are expected eventually, but the primary reason it gave for the buyout was to accelerate the continuing turnaround.

Zoom Sales Growth Slows as Pandemic Boom Wanes

Zoom Video Communications Inc. sales continued to slow as work life returns to normal and the demand for the company's videoconferencing services winds down.

The San Jose, Calif.-based company on Monday said that sales rose 12% in its first quarter, the slowest growth rate on record, and that the top line is expected to rise less than 10% in the current period.

Snap Issues Profit Warning on Economic Conditions Including Inflation

Snap Inc. issued a profit warning Monday and said it planned to slow hiring and spending, adding to adjustments social-media companies are making to adapt to disruptions in the digital ad market.

The company said it is grappling with a range of issues, from rising inflation to Apple Inc.'s privacy policy changes to the impacts from the war in Ukraine and other factors. "There is a lot to deal with in the macro environment today," Chief Executive Evan Spiegel said Monday at a JP Morgan Chase & Co. conference. Conditions have deteriorated "further and faster" than expected since the company issued its guidance for the current quarter, he said.

Airbnb to Quit China Business as Harsh Lockdowns, Competition Weigh on Demand

Airbnb Inc. plans to close its domestic business in China after harsh Covid-19 lockdowns compounded the pain from mounting local competition, according to people familiar with its decision.

Bookings of stays and experiences in China typically account for about 1% of Airbnb's overall revenue, the people said.

Write to paul.larkins@dowjones.com

Expected Major Events for Tuesday

04:30/NOR: 2Q Consumer Confidence

05:00/FIN: Apr PPI

05:00/FIN: Apr Labour force survey, incl unemployment

06:00/NOR: 1Q Labour Cost Index - preliminary figures

06:00/UK: Apr Public sector finances

06:45/FRA: May Monthly business survey (goods-producing industries)

07:00/CZE: May Business cycle survey (consumer/business confidence)

07:15/FRA: May France Flash PMI

07:30/GER: May Germany Flash PMI

08:00/EU: May Eurozone Flash PMI

08:30/UK: May Flash UK PMI

09:00/MLT: Apr RPI

10:00/UK: May CBI Distributive Trades Survey

10:00/FRA: 1Q OECD trade statistics release

12:00/POL: Apr Broad money M3

14:00/DEN: Apr Central Government Finance & Debt

All times in GMT. Powered by Kantar Media and Dow Jones.

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May 24, 2022 00:24 ET (04:24 GMT)

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