Markets wrap: US profit warnings and China growth fears smother early ASX gains

A decent start for the ASX 200 fell by the wayside after some worrying profit updates from the US and concerns over the Chinese economy.

The Australian sharemarket looked set to gain ground on Tuesday before a worrying echo from across the Pacific turned the mood negative.

The benchmark ASX 200 rose by as much as 0.2 per cent at the open but soon fell by the wayside after banking heavyweights UBS and JP Morgan slashed their China 2022 growth forecasts.

A profit warning from US social media company Snap also cast a pall over the local index and dragged tech stocks into the doldrums.

Afterpay owner Block Inc dropped 7.3 per cent to $115.56 and there were heavy losses for Xero, Wisetech Global, Sezzle, Zip Co, and Tyro Payments as the ASX 200 finished the day 20.1 points, or 0.3 per cent, lower at 7128.8.

The broader All Ordinaries lost 25.7 points, or 0.4 per cent, to 7373.2, while the Aussie dollar eased back below 71 US cents at the local close, having risen in the wake of Labor’s weekend federal election victory.

JP Morgan and UBS have sharply downgraded China growth. Picture: NCA NewsWire/Joel Carrett

Church payments app Pushpay climbed 15.6 per cent to $1.295 after flagging it had received additional takeover interest.

Meanwhile, shares in gambling giant Tabcorp finished the day 80.2 per cent lower at $1.055 after the company split its more lucrative Keno and lotteries business.

That entity – known as The Lottery Corporation – ended Tuesday’s trade at $4.70.

Wall Street had initially set the local market up for a strong session, with the Dow Jones, Nasdaq, and S&P500 each rising strongly overnight.

US equities rallied powerfully as JP Morgan raised its income outlook and was upbeat on the US economy.

But all momentum was wiped out by a handful of after-hours announcements that sent a shiver down the spine of Asian sector traders.

Snap’s downbeat forecast for the quarter knocked its stock lower, dragging Facebook owner Meta with it.

“Snap, crackle, pop may bring back memories of breakfast cereals, but for Snap Inc their quarterly guidance was more of a dog’s breakfast,” OANDA Asia Pacific senior analyst Jeffrey Halley said.

A fall in US futures came after JP Morgan and UBS sharply downgraded growth in China. where Covid-19 cases remain stubbornly high.

“The market continues to turn itself inside out and back to front as it tries to decide if it has priced all of the impending rate hikes, soft landing or recession, inflation or stagflation, China, Ukraine, US summer driving season, supply chains, the list goes on,” Mr Halley wrote.

“The result is a day-to-day chop-fest, and it seems clear that volatility is the winner.”

Tech stocks were dragged into the doldrums. Picture: NCA NewsWire/Joel Carrett

The local banks and miners were mostly solid on Tuesday, with Macquarie Group and BHP the most notable decliners, respectively dipping 0.6 per cent to $178.81 and 0.1 per cent to $47.80.

CSL gained 0.4 per cent to $274.15 and retail and industrial conglomerate Wesfarmers added 0.3 per cent to $46.13, while Goodman Group and Woodside Petroleum also gained ground.

It was dire for media and telco stocks though, with Telstra down 1.3 per cent to $3.87 amid a sea of red.

Jobs site Seek fell 4.2 per cent to $24.35, REA Group dropped 3.6 per cent to $110.04, while carsales.com fell 3.5 per cent to $19.27.

Supermarket Woolworths also fell, losing 0.7 per cent to $34.34, while Coles ended 0.6 per cent lower at $17.65.