Markets recover after US tech rout

Investors on edge due to earnings concerns, softening demand and tightening US monetary policy

European shares recovered yesterday after feeling the strain of a tech rout on Wall Street, while the dollar lost momentum as hopes mounted for a de-escalation in the Sino-US tariff war.

Fears of a peak in corporate earnings growth, softening global demand and rising interest rates in the United States have put investors on edge in the past month.

The trade war between Washington and Beijing plus risks from Brexit and Italy’s budget row with the European Union have helped the dollar as investors dump riskier assets. Volatility is on the rise again.

Monday’s equity sell-off in the US was led by tech stocks, with Apple’s stock slumping over 5 per cent.

But fears about a long-term slump in technology stocks faded yesterday as investors focused on efforts to ease trade tensions between the world’s two largest economies. The pan-European STOXX 600 had gained 0.5 per cent by 1130 GMT.

Markets in Asia also recouped some losses after a report that China’s top trade negotiator was preparing to visit the United States before a meeting between the leaders of the world’s two largest economies.

The Shanghai Composite Index rose 0.9 per cent but Japan’s Nikkei lost more than 2 per cent.

“Though there have been some efforts to resolve the [trade war] tensions in recent days, in my opinion things are likely to get worse before they get better,” said UBS chief executive Sergio Ermotti.

In Europe, sterling jumped half a per cent to as high as $1.2924 after a British cabinet office minister said a Brexit agreement with the EU was still possible in the next 24 to 48 hours.