European and Asian shares tumbled, following a rout on Wall Street overnight led by heavy selling of Apple and other technology stocks.
In Europe, the continent-wide Stoxx 600 fell 0.2 per cent in early dealings on Friday, with Frankfurt’s Xetra Dax slipping by the same amount and London’s FTSE 100 dropping 0.3 per cent.
In the Asian trading session, Australia’s S&P/ASX 200 shed 3 per cent of its value. Hong Kong’s Hang Seng index, which is sensitive to moves on Wall Street, fell 1.4 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 0.8 per cent.
This followed a frenzied day on Wall Street, where the tech-focused Nasdaq Composite index fell 5 per cent while the S&P 500 dropped 3.5 per cent.
Futures markets indicated the rout on US markets would persist into Friday, ahead of US payrolls data that could provide another selling trigger if the pandemic-scarred labour market has added fewer jobs than forecast.
Contracts on the Nasdaq pointed to a fall of 1.4 per cent in opening trades, with the S&P 500 signalled to open 0.6 per cent lower.
However, with the S&P 500 7 per cent higher for the year to date and the Nasdaq Composite up 28 per cent, investors were sceptical that Thursday’s fall for stocks would be sustained for long.
“It doesn’t look like much other than profit-taking. Pretty massive profits, I grant you,” said Robert Carnell, head of Asia-Pacific research at ING. “This was not rotation out of stocks into bonds . . . this is not ‘risk off’ returning.”
Shares in major tech companies suffered heavily on Thursday, with Apple falling 8 per cent, wiping off more than $150bn from the company’s market capitalisation. Amazon, Alphabet and Microsoft all ended Thursday’s session down more than 4 per cent.
The sell-off in American tech stocks spread to China’s tech champions, with ecommerce group Alibaba dropping as much as 6.7 per cent and rival Tencent down as much as 3.9 per cent.
Investors and analysts have expressed growing concern that monetary and fiscal stimulus have pushed stocks to unsustainable levels. Valuations are looking stretched with the global pandemic still spreading and no vaccine in sight while the looming US presidential election in November is heightening volatility.
“Market corrections are to be expected,” said Kerry Craig, global market strategist at JPMorgan Asset Management. “A market fuelled by central bank largesse, economic surprises and record earnings [performance] in the last few months was never going to maintain its heady pace forever.”
Louis Tse, managing director of VC Brokerage in Hong Kong, said Chinese tech stocks had entered a “tailspin” after a recent rally, pointing to losses of more than 3 per cent for the China-focused Hang Seng Tech index in the past two days.
“We’re seeing heavy profit-taking ahead of the weekend,” he said.
The sell-off for equities sent shudders through commodities markets, with oil benchmarks dropping. Brent crude, the international benchmark, fell 1 per cent to $43.61 a barrel. Gold, which often serves as a haven in periods of uncertainty, rose 0.3 per cent to $1,936 a troy ounce.
The dollar, which has weakened significantly throughout the pandemic, traded steadily, with the main gauge of its performance against trading partners’ currencies flat at 92.8, which is around a two-year low.
US government bonds declined slightly in the run-up to the payrolls data, which is due at 12:30 GMT. The yield on the benchmark 10-year Treasury ticked 0.02 percentage points higher to 0.638 per cent.