World stocks struggle to find feet after tech-driven rout
PRESSURE ON TECHNOLOGY STOCKS EASES, AFTER LOSING $1TR IN VALUE
World stocks attempted to steady yesterday following a bruising Wall Street session that wiped $1 trillion (Dh3.67 trillion) off the value of leading US tech shares, while oil prices staged a modest rebound after slumping to one-year lows.
US stocks recovered from a brutal two-day selloff as strong earnings from Foot Locker and gains in technology stocks lifted investor sentiment ahead of the Thanksgiving holiday.
Foot Locker Inc shares surged 15.9 per cent after the footwear retailer posted its first gain in same store sales in six quarters that also trumped expectations.
Apple shares rose 0.5 per cent. They have lost more than 20 per cent since their record closing high on October 3 due to concerns over waning iPhone demand.
The pressure on technology stocks appeared to have eased yesterday, with the other members of the FAANG group — Amazon.com Inc, Netflix Inc and Alphabet Inc and Facebook Inc — gaining between 1.3 per cent and 2.3 per cent.
“The tone for bulls is to find anything to stop the bleeding,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird.
This week’s falls saw the Nasdaq index touch seven-month lows and energy shares too had dropped in line with a 6 per cent oil price slump S&P 500.
That fed through to Asia yesterday, taking MSCI’s index of ex-Japan Asia-Pacific shares almost half a per cent lower, but it clawed back some of those falls to trade flat by 0900 GMT. MSCI’s all-country benchmark was flat too, attempting to snap two days of falls.
That, alongside a 1.5 per cent bounce in Brent crude futures and some optimism over Italy’s budget stance, helped European equities open 0.4 per cent higher, with a tech index up half a per cent.
David Vickers, senior portfolio manager at Russell Investments, noted however that gloom has tended to deepen as the Wall Street session progresses and more company earnings emerge.
“High-flying momentum stocks have come off in a fairly spectacular fashion. At one point Apple and Amazon accounted for 40 per cent of US equity gains and people were just recycling money into the winners,” Vickers said.
“That’s come off the boil and set the cat among the pigeons... We’ve seen a lot of reflexivity, when selling begets selling, the market starts to turn over, people take profits, it leads to another leg down and so on.”
Markets also appear to be preparing for a loss of momentum in global economic growth as China takes a hit from Washington’s trade tariffs and the United States comes off the sugar-high of President Donald Trump’s tax cuts.
Vickers said that after 20 per cent-plus earnings growth at US companies, some investors were disappointed with signs this would slow to single digits as the stimulus effect wore off.
“If you have a market like the S&P500, which is two standard deviations expensive, it becomes difficult if you don’t think you will get the same kinds of earnings growth in future,” he added.
The growth concerns have also been revived by comments from US Federal Reserve officials who suggested economic outlook concerns could slow the pace of its monetary policy tightening cycle or even end it.