Technology companies led a drop in European stocks and futures on the Nasdaq pointed to fresh losses on concerns valuations have reached extremes. The pound weakened for a fifth day.
Tesla Inc. and Apple Inc. dropped in U.S. pre-market trading and Nasdaq futures slid 1.6 per cent. EasyJet Plc shares slumped after the discount airline said flight demand is lower than expected. Treasury yields fell and the dollar index strengthened. Oil extended losses on a bleak outlook for short-term demand.
Investors will be closely watching how tech shares react on Tuesday after last week’s selloff, which was driven by doubts over stretched valuations and reports that huge options positions have fanned a speculative fever.
The U.S. and China relationship is also back in focus after President Donald Trump said he plans to end America’s reliance on the country. Trump also threatened to punish any American companies that create jobs overseas, and to forbid those that do business in China from winning federal contracts.
“The path of least resistance for the market may well be to test the downside,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “Ultimately, if there is more selloff, I suspect real money investors will take the opportunity to buy the dip.”
Tesla shares fell 10 per cent after the carmaker was passed over for inclusion in the S&P 500. Royal Mail Plc, the privatized British postal service, surged 15 per cent after saying it wants to overhaul its business and shift service to the parcels market.
In the U.K., the pound weakened and stocks slumped as Prime Minister Boris Johnson threatened to abandon Brexit talks without a new trade deal. Money markets have brought forward expectations that the Bank of England will cut interest rates.
The Turkish lira weakened to an all-time low against the dollar for a fourth session amid concern that monetary policy remains too loose to backstop the currency.
Equities rose in Asia, with shares in Australia and South Korea leading the advance.
Here are some key events coming up:
- The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.
- U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month.
These are the main moves in markets:
Stocks
- Futures on the S&P 500 Index dipped 0.3 per cent as of 10:31 a.m. London time.
- The Stoxx Europe 600 Index advanced 0.7 per cent.
- The MSCI Asia Pacific Index was little changed.
- The MSCI Emerging Market Index declined 0.3 per cent.
Currencies
- The Bloomberg Dollar Spot Index advanced 0.5 per cent.
- The euro declined 0.1 per cent to US$1.1809.
- The British pound sank 0.6 per cent to US$1.3086.
- The Japanese yen was little changed at 106.32 per dollar.
- The offshore yuan weakened 0.1 per cent to 6.8365 per dollar.
Bonds
- The yield on 10-year Treasuries fell three basis points to 0.69 per cent.
- The yield on two-year Treasuries dipped less than one basis point to 0.14 per cent.
- Germany’s 10-year yield declined less than one basis point to -0.48 per cent.
- Britain’s 10-year yield sank five basis points to 0.216 per cent.
- Japan’s 10-year yield decreased less than one basis point to 0.04 per cent.
Commodities
- West Texas Intermediate crude declined 2.9 per cent to US$38.35 a barrel.
- Brent crude dipped 2.3 per cent to US$41.39 a barrel.
- Gold weakened 0.6 per cent to US$1,922.78 an ounce.
–With assistance from Kit Rees.
