Amazon wobble ripples across markets
Company’s stock tumbles over 2% on Thursday after it reports a slump in profits
An earnings miss by Amazon that hit US technology stocks overnight rippled through other markets yesterday, with Asian stocks retreating from recent highs and European tech shares opening sharply lower.
Amazon’s stock tumbled over 2 per cent on Thursday after it reported a slump in profits, as its rapid and costly expansion into new shopping categories and countries showed no sign of slowing.
“It has been a pretty good season for earnings and this is the first big company that has sowed a few doubts on that, and it also raises question on where the broader tech sector is headed from here,” said Investec economist Victoria Clarke.
Amazon has been one of the companies powering the sector this year, with a 40 per cent rise up until Thursday.
Though other US sectors were resilient, Wall Street’s “fear index”, the VIX, rose sharply on Thursday from a record low of 8.84 per cent to an intra-day high of 11.5 per cent.
Amazon is one of the socalled “FANG” group of the most influential tech stocks — the A between Facebook and Netflix with Google at the end — hence the broad impact of its setback, which hit Asian shares as well knocking the US tech sector off recent highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8 per cent, with Samsung Electronics, Asia’s largest company by market capitalisation, dropping 3.5 per cent.
Europe’s tech index fell 1.6 per cent on Friday and was among the region’s worst-performing sectors.
“While Amazon’s results may only be responsible for some short term negativity, with the tech sector as a whole still enjoying a remarkable year, the failure in the Senate could pose further problems,” said OANDA analyst Craig Erlam.
US Senate Republicans failed early yesterday to overturn the health care law known as Obamacare, in a stinging blow to President Donald Trump that may end the Republican Party’s seven-year quest to repeal the Affordable Care Act.
The dollar dipped against its major peers on Friday, though second quarter US economic growth data due later could potentially give it some respite from the recent sell-off.
Economists expect the world’s largest economy to have grown about 2.6 per cent in the second quarter, from 1.4 per cent in the first quarter.
The Swiss franc was one of the biggest movers in the currency market and is on track to post its biggest monthly fall against the euro for six years.
The franc has been falling as investors bet the Swiss National Bank will keep monetary policy loose as other central banks move towards tightening.
Oil prices hit a two-month high yesterday after key Opec members pledged to reduce exports and the US government reported a sharp decline in crude inventories.
Brent crude futures was at $51.73 (Dh190) per barrel after pushing higher yesterday in European trading.