US stock markets are beginning to sense tremors originating in the technology sector. The US tech index had its worst sell-off since 2011, plunging 4.4%. Global stocks continued to tumble on Thursday as the FTSE 100 closed almost 2 per cent down while on Wall Street the S&P 500 entered its sixth consecutive day…
US stock markets are beginning to sense tremors originating in the technology sector.
The US tech index had its worst sell-off since 2011, plunging 4.4%
Background
Global stocks continued to tumble on Thursday as the FTSE 100 closed almost 2 per cent down while on Wall Street the S&P 500 entered its sixth consecutive day in the red. A sell-off in London followed on the heels of a rout in New York that has seen the S&P drop 5.5 per cent in the past six days.
Energy shares took a particular battering as oil slid back to $81 a barrel from a four-year high of $86.34 last week. The Nikkei fell 4 per cent while China’s Shanghai Composite gauge closed down more than 5 per cent and Taiwan’s benchmark was down 6 per cent.
Analysis
The world’s 500 richest people lost $99 billion in one day due to the global stock market rout that started on Wall Street, a report said. This year’s second-sharpest one-day drop came Wednesday for the world’s wealthiest, according to Bloomberg.
The group shed 1.2 per cent of its combined net worth, representing a total loss of $US63 billion ($89 billion) as luxury stocks tumbled following reports of a Chinese trade crackdown, and as US equities slid on concerns over rising Treasury yields.
All major American equity benchmarks fell at least 1 per cent, with the S&P 500 sliding to a three-week low and the Nasdaq 100 Index on track for its steepest slide since April. Real-estate and Wall Street consumer shares had outsized losses as high-dividend-yielding stocks retreated after the 10-year yield poked above 3.2 per cent for the first time in seven years. Financial firms were the only gainers in the broader index.
Among the biggest drags on the S&P were the so-called FANG group of stocks, which were among shares that helped propel the Nasdaq to its recent record high. Google parent Alphabet sank 2.8 per cent and Netflix slumped 3.6 per cent.
Tech stocks were demolished in the big stock market sell-off. Of the top five tech FAANG stocks, Amazon was hit the hardest by the slump. Amazon’s founder Jeff Bezos, who tops Bloomberg Billionaires Index, lost $9.1 billion, the most in the list, lowering his net worth to $145.2 billion.
The fortune of Europe’s wealthiest person, Bernard Arnault, tumbled $4.5 billion to $66.9 billion as shares of his luxury empire LVMH fell after the company confirmed China was tightening border checks. Arnault saw more than half of his gains for the year erased. The French tycoon lost $3.5 billion on Friday as rumours began to circulate on social media about the stepped-up border checks, which are intended to curb unauthorized imports of items like Louis Vuitton handbags and Berluti boots.
17 people saw their net worth cut by more than $1 billion as global losses spread equally across sectors. Berkshire Hathaway Inc’s U.S. Warren Buffett suffered the biggest losses in terms of percentage — 4.9 per cent or $4.5 billion. The world’s 67 wealthiest tech moguls’ collective net worth slid by some $32.1 billion which includes Bill Gates and Facebook Inc’s Mark Zuckerberg.
The U.S. was hit the hardest by the rout as American billionaires lost $54.5 billion. A dozen explanations exist for the rout, which has sent Amazon Inc., Netflix and Nvidia Corp. down 10% or more since 1 October. Treasury yields are up, a trade war with China is raging, and the Federal Reserve is raising rates. Another explanation is tied to the earnings that computer and software companies are about to report.
Assessment
Our assessment is that as the global events add up, investors get nervous and the shares go down, this is a normal market reaction. We believe that global equity markets are facing a perfect storm of headwinds such as rising US bond yields, US-China trade disputes, global growth concerns and prospects of higher US interest rates. We feel that as long as these sentiments remain, the appetite for equities is likely to diminish further and could further drag indexes further southward.
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