Global equities slide to three-month low as tech stocks plunge

Cornelia Mascio
Ottobre 11, 2018

Investors are wary of possible further U.S. interest rate hikes, which will raise the cost of corporate borrowing and could drag on economic growth.

Strong economic data and a positive outlook from Fed officials have led to a sell-off in US Treasury bonds, particularly longer-term ones, sparking concerns about even higher interest rates.

Whether the lower reading will quell expectations the Federal Reserve will hike interest rates again in December remains to be seen, said Yousef Abbasi, global market strategist at INTL FCStone in NY.

Most sectors in Europe were trading in the red, with tech stocks bearing the brunt of early morning selling pressure after the big USA technology stocks that have been the driving force behind a multi-year bull market posted heavy losses overnight. "Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the International Monetary Fund about financial stability risks and continued trade tension all driving uncertainty", summed up analysts at ANZ.

The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States.

Hong Kong's Hang Seng index shed 3.5 percent to 25,266.37.

US consumer prices rose less than analysts had forecast in September, reducing expectations the pace of inflation is accelerating despite a tightening labor market.

Tokyo's Nikkei 225 gave up 3.9 percent to 22,590.86 and the Shanghai Composite lost 5.6 percent to 2,573.11.

Europe's tech index .SX8P fell as much as 3.4 percent, before paring some losses as Ingenico INGC.PA rallied 12.4 percent after Natixis CNAT.PA said it was examining a merger of its payments activities with the financial and payments firm. Australia's S&P/ASX 200 slipped 2.7 percent to 5,883.80.

The Dow Jones Industrial Average .DJI fell 198.28 points, or 0.77 percent, to 25,400.46.

Japan's Nikkei sank 3.2 per cent in early trading, which would be the biggest daily drop since March. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1 percent lower at 7,422.05.

On Wall Street, the S&P 500 index suffered its biggest one-day fall since February as technology shares tumbled on fears of slowing demand.

The Russell 2000 index of smaller-company stocks shed 2.9%, to 1,575.41. Apple shares fell 1.2 percent.

Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two-and-a-half years.

Amazon has soared 50% this year, but its stock has fallen 14% from its all-time high in early September.

Francis Tan, an investment strategist at UOB Private Bank, says "the valuation of US stocks, especially tech stocks, is still pretty high", and investors could be tempted to not buy into them yet. The dollar fell back to 112.10 yen, a telling retreat from last week's 114.54 peak.

USA crude was off 52 cents at US$72.65 in Asia, while Brent crude had yet to trade after falling 2.3 per cent overnight to end at US$83.09 a barrel.

A television screen on the trading floor of the New York Stock Exchange shows the plunging numbers for the Dow Jones industrial average, March 22, 2018, as investors feared trade tensions will spike between the USA and China. Brent crude, the global standard, dropped $1.18 to $81.91 a barrel.

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