<blockquote> <div>“When a lot is happening at the expense of the next generation, it is very important to find better and currently more peaceful ways with leaders from politics and business.” - Vivian Bernet, head of organising committee of the 51st St Gallen Symposium that carried the theme ‘Collaborative Advantage’</div> </blockquote>

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US stocks suffer steepest tumble in almost 24 months

Stocks in the US recorded the largest daily fall in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The US dollar and Treasuries gained amid a pickup in haven bids.

The selloff sent the S&P 500 down 4%, the most since June 2020, with the plunge in consumer shares surpassing 6%. Target Corp tumbled more than 20% in its worst rout since 1987, after becoming the second big retailer in two days to trim its profit forecast due to a surge in costs.

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Target’s fuel and freight costs soared in the first quarter while a shift in consumer spending caused a sharper-than-expected slowdown in apparel and home-goods sales, prompting the company to mark down bloated inventories.

The surge in costs shows little sign of easing, CEO Brian Cornell said. Operating profit will amount to only about 6% of sales this year, 2 percentage points below the previous forecast, Target said on May 18. The company’s first-quarter adjusted profit missed the lowest of 23 analyst estimates compiled by Bloomberg.

Shares of retailers from Walmart to Macy’s were also caught in the downdraft. Walmart cut its profit forecast on May 17 and also posted its biggest stock decline since 1987.

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Meanwhile, the Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple and Amazon.com slid at least 5%.

The Dow Jones Industrial Average sank 3.6% or 1,164.5 points.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down more than 10 basis points. The US dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s ongoing Covid-19 lockdowns.

In some of his most hawkish remarks to date, Federal Reserve chair Jerome Powell said on May 17 that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. If the Fed raises its key rate somewhat above what it thinks is a “neutral” level for the economy and stops there, that should help bring inflation down from current elevated levels, Chicago Fed president Charles Evan said. — Bloomberg

Carousell, L Catterton spac merger talks end amid rout

Singapore-based online classifieds marketplace operator Carousell was seeking a US listing via a special purpose acquisition company (spac) held by L Catterton. Talks to go public through a merger with blank-check company L Catterton Asia Acquisition Corp has ended amid market volatility, according to people familiar with the matter.

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The spac, which has been conducting due diligence on Carousell over the past few months, has not been able to reach a merger agreement with the Southeast Asian business.

The stock market rout has made it difficult to arrange a private investment in public equity (PIPE), where typically other investors chip in funds alongside those contributed by the spac itself to the merged entity. Macroeconomic uncertainty and valuation concerns are also among the factors weighing on a potential deal.

While both Carousell and L Catterton have not commented on the matter, shares in L Catterton Asia Acquisition slumped to its lowest level in more than five weeks in New York. The stock was down 0.2% on May 18.

The companies were in exclusive talks to merge in a transaction that could have valued the combined entity at as much as US$1.5 billion ($2.08 billion) and the deal was meant to include a PIPE worth a few hundred million US dollars. — Bloomberg

China stops reporting bond trade by foreigners

China’s main bond trading platform for foreign investors has quietly stopped providing data on their transactions, a move that may heighten concerns about transparency in the nation’s US$20 trillion ($27.8 trillion)debt market after record outflows.

Daily trades by overseas investors were last provided for May 11 by the China Foreign Exchange Trade System (CFETS), according to people familiar with the matter, who added that the data showed sizeable net foreign outflows that day, with some selling also seen for most days in April.

It is unclear why CFETS stopped publishing the figures, which are typically updated one day later. There was also no indication of whether the move was temporary or related to the lockdown of Shanghai, the nation’s onshore financial capital.

While CFETS, which is affiliated with China’s central bank, has not responded to the matter, it was found that transactions by domestic investors on CFETS are still getting published. The debt traded on its platform include sovereign, provincial, policy banks and credit.

The missing data add to the uncertainty over capital flows into and out of China, as Covid lockdowns and questions over concrete policy support spur market volatility. Global funds sold record amounts of Chinese sovereign debt in February and March as their yield premium over Treasuries collapsed and money managers fretted about a supply surge.

While China has taken major steps in recent years to improve foreign access to its debt and equity markets, international investors have long had concerns about the reliability of the nation’s economic statistics and other official data. Those concerns tend to rise during periods of economic and financial-market turbulence. — Bloomberg

Nomura explores metaverse to boost profits

Nomura Holdings is building a team to help firms tap opportunities in the metaverse, as Japan’s biggest brokerage pushes deeper into digital services and private markets to boost profit.

The Tokyo-based firm is considering using its investment banking knowledge to help companies in the virtual space raise money and advise on how to navigate regulations as they emerge, according to senior managing director Kaoru Numata, who oversees digital projects and retail marketing. Details of Nomura’s plans for the virtual reality market are still being worked out, he said.

Nomura may be able to make money through creating securities out of digital assets, such as shoes, and other non-fungible tokens (NFTs), according to Numata. “You will need financial services where economic activity in the real world merges itself with anything of value created in the metaverse,” he said, acknowledging that it is difficult to identify a “sure way” to generate revenue from the metaverse.

Nomura’s plans for the metaverse are part of a wider digital push, which CEO Kentaro Okuda has called a “critical part” of the brokerage’s expansion into private markets to bolster profit. The firm has been gradually diversifying away from stock broking for retail clients and other market-dependent business toward services that generate more stable fees.

The brokerage’s so-called Digital Company that was set up in April may recruit “a few dozen” partly to boost its research and development of metaverse and other blockchain-driven services, Numata said, declining to say how big the team is currently.

Separately, the firm will later this year launch a subsidiary within the Digital Company to help institutional clients access products and services related to cryptocurrencies, stable coins and non-fungible tokens. It also recently started offering Bitcoin derivatives to clients in Asia after institutional demand for cryptocurrency products “significantly” increased in the past two years.— Bloomberg

Briefs: US stocks suffer worst rout in almost 2 years; China stops reporting bond trades by foreigners

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