FTSE 100 Plunges Into A Correction As Global Markets Hit Eight-Month Low

By Graeme Wearden

block-time published-time 12.29pm BST

Tech has been the golden child for markets this year. But now it’s being disowned by investors, who rushed to ditch internet giants like Amazon (down 6% yesterday), Apple (which dropped 4.8%) Netflix (which shed 8%).

One theory is that people are taking profits – there’s a temptation to cash in your winning stocks when you see shares diving.

Another theory is that tech firms will suffer particularly badly from a full-blown trade war, which looks increasingly likely unless Washington and Beijing start mending fences.

Thirdly, some technology stocks are highly-leveraged, having issued large amounts of debt to fund their growth. So if US interest rates keep rising, their borrowing costs could become rather higher.

block-time published-time 12.17pm BST

Even crypto-currencies are being caught up in today’s selloff.

Bitcoin has shed 5% today to trade around $6,200 at present, down $300 today.

enltrBitcoin tumbles as much as 7% as cryptocurrencies join the global market rout

— Bloomberg Crypto (@crypto) October 11, 2018

block-time published-time 12.00pm BST

In pictures: Markets wobble

Here some photos showing how the stock sell-off has ripped around the world.

It started in New York yesterday when a late slump wiped 3% off the value of the US stock market, while tech stocks suffered particularly badly.

The closing bell of the New York Stock Exchange on October 10, 2018. Photograph: Bryan R. Smith/AFP/Getty Images

This set Asia up for a fall – with Japan’s main indices losing over 3.5%

An electronic stock board showing Japan’s Nikkei 225 index and other markets, in Tokyo. Photograph: Eugene Hoshiko/AP

Australia was also pulled into the mire; its S&P/ASX index shed 2.7%, led by energy and technology companies.

Stock prices are seen at the Australian Securities Exchange (ASX) in Sydney, New South Wales. Photograph: Dan Himbrechts/EPA

Cue more pain in China, where stocks slumped by over 5%. This dragged the market down to its lowest level since 2014, as traders worried that the economy is suffering from the trade war with America.

China stock market
epa07084892 A Chinese man watches an electronic board showing the stock index and prices at a securities brokerage in Beijing, China, 11 October 2018. Stock markets across Asia plunged after the Dow Jones fell over 800 points overnight. EPA/ROMAN PILIPEY Photograph: Roman Pilipey/EPA

European investors then picked up the baton, and conducted a selling operation of their own.

Heavy losses on all the main exchanges has wiped almost 2% off the Stoxx 600 index, down to to lowest level since the end of 2016.

Madrid’s Stock Exchange today. Photograph: MARISCAL/EPA

And with Britain’s FTSE 100 still down over 100 points, and in correction territory (10% below its record high), it’s been a bad morning in the City.

block-time published-time 11.25am BST

Helal Miah, investment research analyst at The Share Centre, says investors have been speculating for weeks that a correction was coming – and now “we’ve talked ourselves into a sell-off”.

Miah pins the blame on trade war fears, and the prospect of higher US borrowing costs:

“The sell-off has been gathering strength for about two weeks now lead by the Asian markets as concerns were raised about China’s growth rate, but fingers will also point at the hike in tariffs between the US and China and the impending trade wars.

“But for us and many other analysts, a market sell-off was always going to be most likely as a result of the rising interest rate environment, especially in the US. We had the much expected hike in September from the US Federal Reserve now taking interest rates to 2.25% with the expectation that the policy makers will keep in their path of steady rate hikes as the US economy strengthened.

But with unemployment recently hitting 3.7%, and as signs slack in the economy and with the labour market disappearing, there is the expectation that prices and inflation could start running ahead of the Fed’s expectations.

As a result, the policymakers may now think about increasing rates at a faster pace than anticipated.

block-time published-time 11.01am BST

Over in New York, financial workers will be rising early and inspecting the damage across the global markets.

Wall Street got an early taste of the rout, of course, when the Dow plunged by over 800 points in late trading on Wednesday.

US traders can now see that the shockwave rippled to Asia, sending major indices down by 3%, and then Europe, where the Stoxx 600 is down 1.8% now.

And the bad news is that New York is expected to suffer fresh losses today. The futures market suggests the Dow will fall by another 1%, when trading begins again, in three and a half hours time.

enltrStock market selloff spreads across the globe.
Shanghai Composite down 5.2%. Taiwan’s TWSE Index down over 6%.
Japan’s Topix declined 3.5%.
Dow futures down about 200 point. https://t.co/z8lXZ260cg

— Jim Roberts (@nycjim) October 11, 2018

block-time published-time 10.36am BST

Just in: A group of leading developing countries are calling for an end to the trade wars that have gripped the global economy this year.

The G24, which includes China, India, Brazil, Mexico and Argentina, say the global trading system should be reformed, not smashed up.

In a statement issued in Bali, alongside the IMF’s meeting his week, the G24 warn that emerging markets are suffering:

“Trade uncertainties and financial and monetary conditions compound rising debt vulnerabilities.

Improving debt sustainability depends on a supportive external trade and financial environment, timely contingency financing and the adequate flow of concessional financing for low income countries.”

block-time published-time 10.11am BST

Back in the UK, a new Bank of England survey shows that it’s harder to get access to credit, as lenders tighten up:

enltrLatest Bank of England Credit Conditions Survey shows lenders reporting yet another tightening in access to unsecured credit in the third quarter of the year. That’s the seventh consecutive quarter of apparent tightening, with more expected towards the end of 2018 pic.twitter.com/ZvZhDLmj6W

— Matt Whittaker (@MattWhittakerRF) October 11, 2018

block-time published-time 10.01am BST

There’s no relief in the City.

After two hours of bruising trading, the FTSE 100 sinking deeper into correction territory, down 123 points or 1.7% at 7022.

Fiona Cincotta, senior market analyst at City Index, says investors have been perturbed by New York’s 3% slump yesterday.

Wednesday’s plunge on Wall Street came as a shock and global markets are now readjusting. Sellers shaved 830 points off the Dow Jones Industrial Average and 4% of Nasdaq with big tech names like Amazon, Intel and Microsoft bearing the brunt of the decline. The picture is not looking much better this morning. The Nikkei and the Shanghai Composite closed over 4% and 5.7% lower respectively, the FTSE started the day with a 1.19% decline and continued to sink from there.

She also explains how the recent rise in US bond yields – because investors expect higher inflation and interest rates – is now hurting stocks:

The plunge in US stock markets comes after a long run of almost undisrupted gains on Wall Street which were bound to come up for a correction. The strong US economic background that has supported share prices this year is now working against that same market. Rising interest rates are fuelling concerns that higher borrowing costs will erode the margins of US companies and with the domestic labour market at its strongest in nearly 50 years, wage pressures are filtering into companies’ costs.

The 10-year Treasury yield is used as a reference price for mortgages, car loans and other consumer debt and a spike in those yields is hitting industries like car makers and house builders that are exposed to consumer borrowing.

block-time published-time 9.47am BST

Fear Index hits six-month high

The VIX volatility index has hit its highest level since April, following the hefty losses seen in the markets in recent days.

enltr #VIX (volatility) is spiking pic.twitter.com/9zFdDYdZcL

— Danske Bank Research (@Danske_Research) October 11, 2018

The number of contracts for trading the VIX has also jumped, showing that traders expect the current market volatility to continue.

block-time published-time 9.32am BST

Paul Donovan of UBS Wealth Management blames the Wall Street sell-off on Donald Trump’s decision to impose tariffs on Chinese goods:

US equities seem to be (finally) reflecting the cost of US President Trump’s trade taxes. Around 80% of global trade involves multinational (generally listed) companies. A bit less than half of S&P earnings come from outside the US.

However, listed companies are only 25% of the US economy. Equities are at greater risk than the economy if trade is taxed aggressively.

block-time published-time 9.29am BST

Here’s a taste of the mood on the trading floors today:

enltrEquity longs: pic.twitter.com/V2zSBVNqYw

— RANsquawk (@RANsquawk) October 11, 2018

block-time published-time 9.16am BST

China’s stock market has closed at its lowest level in almost four years, as the trade war with America continues to bite.

The Shanghai composite index ended the day down 5.2% its heftiest rout in over two years.

enltrBiggest daily fall in Chinese stocks since the early days of 2016. pic.twitter.com/91hnH5Bovn

— Mike Bird (@Birdyword) October 11, 2018

Trading screens were a sea of green, not red, though (as red is a lucky colour, it is used to show rising prices in China)

Investors at a stock exchange in Hangzhou today. Photograph: Costfoto/Barcroft Images

block-time updated-timeUpdated at 9.20am BST

block-time published-time 8.59am BST

Footsie stumbles into correction territory

Today’s sell-off has dragged the FTSE 100 index into a correction!

The blue-chip index has now lost more than 10% of its value since May, when it traded at an all-time high of 7,903 points.

That’s a blow to anyone whose invested money in UK stocks in recent months.

The FTSE 100 over the last year Photograph: Thomson Reuters

Neil Wilson of Markets.com has helpfully drawn up a list of the key factors behind the sell-off:

  1. Rising bond yields – the sharp rally last week was the cue for a sustained period of declines which culminated in yesterday’s selloff. Now we have a lot of momentum – the breadth of the decline – we could see things get worse before rallying.
  2. China and trade – we thought that Nafta was important but really the fear is that we see the Sino-US tensions get worse. Comments around currency manipulation have not helped risk sentiment. No resolution can be expected until after the mid-terms.
  3. Fears around luxury stocks and comments from LVMH on Chinese demand have raised some concerns around earnings.
  4. Italy – the ongoing Rome-Brussels spat is keeping European investors in a risk-off stance.
  5. Fresh valuation concerns heading into earnings season

block-time updated-timeUpdated at 9.11am BST

block-time published-time 8.47am BST

Global markets hit eight-month low

Yikes! World stock markets have slumped to their lowest level since February.

That’s according to data provider MSCI, whose ‘all country’ index has careered down to an eight-month low this morning.

That’s thanks to the triple-whammy of losses in Wall Street, the rout on Asia, and this morning’s heavy early losses in Europe.

Craig Erlam of trading firm OANDA says some frightened investors are ditching stocks:

European stocks are the latest casualty in the global sell-off that has rattled markets over the last 24 hours, as investors worry about the potential for a sharper correction on the back of rising bond yields.

It’s been something of a bloodbath overnight, as investors saw what occurred in the US – despite there being no clear catalyst for such a move – and dashed for the exits as fears grow that global risks are mounting and the bill is coming due. While people are naturally pointing to the bond market to explain the sudden panic – most notably Trump who’s been laying the groundwork for blaming the Fed for the last couple of months – I wonder whether the underlying risk in the markets for some time has left market primed for a correction and investors have simply fled at the first sign of danger.

Paras Anand, head of asset management for Asia Pacific at Fidelity International, argues the sell-off in America isn’t a shock:

“The sharp sell-off in the US has likely caught no one by surprise.

If anything, investors have been wondering how, in the face of tighter monetary policy, a contracting labour market and rising oil prices, the US has continued to be so resilient.

enltrA sea of red across global stock markets on Thursday following Wall Street’s 3.2% tumble on Wednesday. pic.twitter.com/3fXLgViAHg

— Jamie McGeever (@ReutersJamie) October 11, 2018

enltrGood morning Europe! While you were asleep, Asian stocks got mashed pic.twitter.com/M7QO2quXEX

— Mike Bird (@Birdyword) October 11, 2018

block-time published-time 8.31am BST

European shares hit 20-month low

Ouch! European stock markets have plunged to their lowest level in 20 month.

The Stoxx 600 index, which tracks the largest shares in the region, has slumped by 1.6% today to its lowest level since the start of February 2017.

Every sector is taking a chilly bath:

Eurozone stocks are being dragged down the row between Rome and Brussels over Italy’s new budget, on top of today’s other concerns.

block-time published-time 8.22am BST

Housebuilders and financial stocks are among the big fallers in London this morning:

Biggest fallers on the FTSE 100 today Photograph: Thomson Reuters

block-time published-time 8.09am BST

FTSE 100 hits six-month low

Newsflash: Britain’s FTSE 100 index has hit a new six-month low at the start of trading.

The wave of selling that began in Wall Street last night, and swept through Asia today, has now reached the City.

The Footsie has shed 113 points, or 1.58%. That takes it down to 7032 points, its lowest level since early April.

The FTSE 100 over the last year Photograph: Thomson Reuters

Nearly every share has fallen. One rare exception being gold miner Randgold (as traders scramble for safe-haven assets).

David Madden of CMC Markets says:

The prospect of higher interest rates has left trader worried, as it means higher borrowing costs for companies and individuals. Homebuilders are under pressure as mortgage rates are likely to increase. Retailers are suffering for the same reason.

block-time updated-timeUpdated at 8.17am BST

block-time published-time 8.02am BST

China slumps even deeper into the red A stock indicator board for the Tokyo Stock Exchange in Tokyo today. Photograph: Behrouz Mehri/AFP/Getty Images

Investors in Asia are reeling after a rather brutal day in the markets.

China’s Shanghai index is now down over 6%, as worries over the US trade war intensify. Chinese stocks have now lost more than a fifth of their value this year.

Naeem Aslam of Think Markets fears that the sell-off will continue:

This slump is not going to be over that easily as Asia have already borne the burnt of this year’s trade war, which is fuelled with nothing but uncertainty.

The Chinese markets are already in the bear territory so I expect the U.S. markets to continue to face the selling pressure.

block-time published-time 7.59am BST

Lagarde: Markets are ‘extremely high’ International Monetary Fund chief Christine Lagarde today Photograph: Goh Chai Hin/AFP/Getty Images

Boom! Christine Lagarde, the head of the International Monetary Fund, has waded in.

Speaking at the Fund’s meeting in Bali, Lagarde insisted that it was “legitimate and necessary” for the Federal Reserve to be raising interest rates.

That’s a rebuke to Donald Trump’s claim that the Fed is going crazy.

Touching on the slide in the markets, Lagarde pointed out that US stocks have hit record levels recently – suggesting that a correction should be expected.

“It is fair to observe and all people are observing that the US equity market and stock markets in general have been extremely high”.

The FT has more details.

block-time published-time 7.48am BST

Hussein Sayed, chief market strategist at FXTM, argues that Trump must take some of the blame for the market losses:

While I agree with President Trump that Wednesday’s selloff is the fault of the Fed, he should be reminded that the trade war he started with China and re-imposing sanctions on Iran is also to blame. His actions helped building inflationary pressures and the Fed cannot stand still when it sees the economy overheating.

A steeper selloff in equity markets will probably lead to a pause in hiking rates, but the Fed will be more concerned about the overall economy performance than just equity prices.

block-time published-time 7.41am BST

Markets slide: What the experts say

The widening rift between the US and China is driving shares down, says J.P. Morgan Asset Management global market strategist Marcella Chow :

Headlines around the broadening US-China conflict also continue to worsen as the U.S. arrested and extradited a Chinese official in Belgium to face espionage charges.

There are concerns over a 3Q earnings rise following recent profit warnings and weak reports. In particular, Fastenal’s CEO said the trade war with China is raising material costs that will crimp profit margins and hurt US consumers, and French luxury goods maker LVMH confirmed Chinese border guards are more actively searching travelers’ suitcases for undeclared goods added to fears of a slowdown in spending by Chinese consumers.

Charles Ripley, senior strategist at Allianz Investment Management, blames the prospect of higher interest rates:

“Today’s equity selloff is a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell.

Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that.”

Ari Shrage, chief executive of Aliya Capital, agrees:

“This is much more interest-rate related than anything going on specifically with tech.

Interest rates are moving higher, so stocks that are the most expensive typically are the ones that roll over.

Steven Friedman, senior economist at BNP Paribas Asset Management, points to recent falls in the value of US government debt (or Treasury Bills). That has pushed up the yield on these bonds – a sign that investors expect inflation and interest rates to rise

The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook.

It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion.”

block-time published-time 7.12am BST

Introduction: Markets slide as Trump brands Fed ‘crazy’

Good morning from London.

World stock markets are sliding today as the anxiety that has been building in recent days explodes into a wave of selling.

Shares have fallen sharply across Asia, after Wall Street suffered their worst sell off in eight months overnight, wiping 800 points, or 3%, off the Dow Jones industrial average.

The rout has sent Japan’s Nikkei into a tailspin, shedding 4%. Stocks in Hong Kong are down 3.8%, and there are chunky losses in Australia (-2.8%) and South Korea (4%) too.

My colleague Martin Farrer explains from Australia:

A jittery, volatile week on global financial markets has burst into a frenzy of selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing US interest rate hikes as “crazy”….

“It’s a bit of a bloodbath,” said Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial in New York. “It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies.”

Related: World stock markets dive as Trump attacks ‘crazy’ US rate hikes

European markets had already endured a bad week, and it’s about to get worse.

Traders are predicting that Britain’s FTSE 100 will plunge to a new six-month low this morning, perhaps shedding more than 100 points.

enltr #FTSE100 called -120pts at 7025 pic.twitter.com/pp0wfNfQE7

— Mike van Dulken (@Accendo_Mike) October 11, 2018

enltrEuropean stock-index futures open sharply lower:

*Dax -1.9%
*Stoxx 50 -1.8%
*FTSE 100 -1.8%

— Adam Samson (@adamsamson) October 11, 2018

enltrEuropean Opening Calls: #FTSE 7034 -1.56% #DAX 11519 -1.65% #CAC 5123 -1.61% #MIB 19366 -1.79% #IBEX 9012 -1.64%

— IGSquawk (@IGSquawk) October 11, 2018

The rout is being fuelled by concerns that US interest rates are heading higher, as the Federal Reserve tries to keep a lid on American inflation.

Donald Trump added to the pressure overnight, branding the Fed ‘crazy’ for planning to keep raising interest rates in the months ahead.

Trump told reporters in Pennsylvania that:

“The Fed has gone crazy.

“No, I think the Fed is making a mistake. They’re so tight.”

“It’s a correction we’ve been waiting for, for a long time, but I really disagree with what the Fed is doing.”

The president neglected to mention that its his relaxed fiscal policy, and recent tax cuts, are one factor pushing Federal Reserve governors to hike.

Worries over the US trade war with China (another Trump ‘achievement’), are also worrying investors, after the IMF slashed its growth forecasts earlier this week.

Kit Juckes of French bank Societe Generale says Wall Street has finally caught up with events:

For much of 2018, the US economy has been oblivious to a turn in the global economic cycle, and the US equity market has been unaffected as emerging market equities and currencies have come under pressure. This week has seen the S&P, and the Nasdaq, sit up and pay attention to what’s going on.

The President’s criticism of the Fed adds colour, but no real substance to the situation.

Later today we get new US inflation figures, which could also move the markets. If price pressures keep mounting, the Fed will feel that it needs to keep raising borrowing costs, despite chuntering from the White House.

The agenda

  • 9.30am BST: Bank of England survey of credit conditions
  • 1.30pm BST: US consumer price inflation for September
  • 1.30pm BST: US weekly jobless figures

block-time updated-timeUpdated at 7.37am BST

3105 2018-10-14T06:30:00Z true 2018-10-11T06:28:41Z false false 2018-10-11T11:29:49Z true UKtheguardian.com

https://gu.com/p/9j88a false true https://media.guim.co.uk/946bbfbc6f6ed8395aab7f33b5257d1db39aa13f/0_181_3000_1800/500.jpg false en Tech has been the golden child for markets this year. But now it’s being disowned by investors, who rushed to ditch internet giants like Amazon (down 6% yesterday), Apple (which dropped 4.8%) Netflix (which shed 8%). One theory is that people are taking profits – there’s a temptation to cash in your winning stocks when you see shares diving. Another theory is that tech firms will suffer particularly badly from a full-blown trade war, which looks increasingly likely unless Washington and Beijing start mending fences. Thirdly, some technology stocks are highly-leveraged, having issued large amounts of debt to fund their growth. So if US interest rates keep rising, their borrowing costs could become rather higher. Even crypto-currencies are being caught up in today’s selloff. Bitcoin has shed 5% today to trade around $6,200 at present, down $300 today. Here some photos showing how the stock sell-off has ripped around the world. It started in New York yesterday when a late slump wiped 3% off the value of the US stock market, while tech stocks suffered particularly badly. This set Asia up for a fall – with Japan’s main indices losing over 3.5% Australia was also pulled into the mire; its S&P/ASX index shed 2.7%, led by energy and technology companies. Cue more pain in China, where stocks slumped by over 5%. This dragged the market down to its lowest level since 2014, as traders worried that the economy is suffering from the trade war with America. European investors then picked up the baton, and conducted a selling operation of their own. Heavy losses on all the main exchanges has wiped almost 2% off the Stoxx 600 index, down to to lowest level since the end of 2016. And with Britain’s FTSE 100 still down over 100 points, and in correction territory (10% below its record high), it’s been a bad morning in the City. Helal Miah, investment research analyst at The Share Centre, says investors have been speculating for weeks that a correction was coming – and now “we’ve talked ourselves into a sell-off”. Miah pins the blame on trade war fears, and the prospect of higher US borrowing costs: “The sell-off has been gathering strength for about two weeks now lead by the Asian markets as concerns were raised about China’s growth rate, but fingers will also point at the hike in tariffs between the US and China and the impending trade wars. “But for us and many other analysts, a market sell-off was always going to be most likely as a result of the rising interest rate environment, especially in the US. We had the much expected hike in September from the US Federal Reserve now taking interest rates to 2.25% with the expectation that the policy makers will keep in their path of steady rate hikes as the US economy strengthened. But with unemployment recently hitting 3.7%, and as signs slack in the economy and with the labour market disappearing, there is the expectation that prices and inflation could start running ahead of the Fed’s expectations. As a result, the policymakers may now think about increasing rates at a faster pace than anticipated. Over in New York, financial workers will be rising early and inspecting the damage across the global markets. Wall Street got an early taste of the rout, of course, when the Dow plunged by over 800 points in late trading on Wednesday. US traders can now see that the shockwave rippled to Asia, sending major indices down by 3%, and then Europe, where the Stoxx 600 is down 1.8% now. And the bad news is that New York is expected to suffer fresh losses today. The futures market suggests the Dow will fall by another 1%, when trading begins again, in three and a half hours time. Just in: A group of leading developing countries are calling for an end to the trade wars that have gripped the global economy this year. The G24, which includes China, India, Brazil, Mexico and Argentina, say the global trading system should be reformed, not smashed up. In a statement issued in Bali, alongside the IMF’s meeting his week, the G24 warn that emerging markets are suffering: “Trade uncertainties and financial and monetary conditions compound rising debt vulnerabilities. Improving debt sustainability depends on a supportive external trade and financial environment, timely contingency financing and the adequate flow of concessional financing for low income countries.” Back in the UK, a new Bank of England survey shows that it’s harder to get access to credit, as lenders tighten up: There’s no relief in the City. After two hours of bruising trading, the FTSE 100 sinking deeper into correction territory, down 123 points or 1.7% at 7022. Fiona Cincotta, senior market analyst at City Index, says investors have been perturbed by New York’s 3% slump yesterday. Wednesday’s plunge on Wall Street came as a shock and global markets are now readjusting. Sellers shaved 830 points off the Dow Jones Industrial Average and 4% of Nasdaq with big tech names like Amazon, Intel and Microsoft bearing the brunt of the decline. The picture is not looking much better this morning. The Nikkei and the Shanghai Composite closed over 4% and 5.7% lower respectively, the FTSE started the day with a 1.19% decline and continued to sink from there. She also explains how the recent rise in US bond yields – because investors expect higher inflation and interest rates – is now hurting stocks: The plunge in US stock markets comes after a long run of almost undisrupted gains on Wall Street which were bound to come up for a correction. The strong US economic background that has supported share prices this year is now working against that same market. Rising interest rates are fuelling concerns that higher borrowing costs will erode the margins of US companies and with the domestic labour market at its strongest in nearly 50 years, wage pressures are filtering into companies’ costs. The 10-year Treasury yield is used as a reference price for mortgages, car loans and other consumer debt and a spike in those yields is hitting industries like car makers and house builders that are exposed to consumer borrowing. The VIX volatility index has hit its highest level since April, following the hefty losses seen in the markets in recent days. The number of contracts for trading the VIX has also jumped, showing that traders expect the current market volatility to continue. Paul Donovan of UBS Wealth Management blames the Wall Street sell-off on Donald Trump’s decision to impose tariffs on Chinese goods: US equities seem to be (finally) reflecting the cost of US President Trump’s trade taxes. Around 80% of global trade involves multinational (generally listed) companies. A bit less than half of S&P earnings come from outside the US. However, listed companies are only 25% of the US economy. Equities are at greater risk than the economy if trade is taxed aggressively. Here’s a taste of the mood on the trading floors today: China’s stock market has closed at its lowest level in almost four years, as the trade war with America continues to bite. The Shanghai composite index ended the day down 5.2% its heftiest rout in over two years. Trading screens were a sea of green, not red, though (as red is a lucky colour, it is used to show rising prices in China) Today’s sell-off has dragged the FTSE 100 index into a correction! The blue-chip index has now lost more than 10% of its value since May, when it traded at an all-time high of 7,903 points. That’s a blow to anyone whose invested money in UK stocks in recent months. Neil Wilson of Markets.com has helpfully drawn up a list of the key factors behind the sell-off: Rising bond yields – the sharp rally last week was the cue for a sustained period of declines which culminated in yesterday’s selloff. Now we have a lot of momentum – the breadth of the decline – we could see things get worse before rallying. China and trade – we thought that Nafta was important but really the fear is that we see the Sino-US tensions get worse. Comments around currency manipulation have not helped risk sentiment. No resolution can be expected until after the mid-terms. Fears around luxury stocks and comments from LVMH on Chinese demand have raised some concerns around earnings. Italy – the ongoing Rome-Brussels spat is keeping European investors in a risk-off stance. Fresh valuation concerns heading into earnings season Yikes! World stock markets have slumped to their lowest level since February. That’s according to data provider MSCI, whose ‘all country’ index has careered down to an eight-month low this morning. That’s thanks to the triple-whammy of losses in Wall Street, the rout on Asia, and this morning’s heavy early losses in Europe. Craig Erlam of trading firm OANDA says some frightened investors are ditching stocks: European stocks are the latest casualty in the global sell-off that has rattled markets over the last 24 hours, as investors worry about the potential for a sharper correction on the back of rising bond yields. It’s been something of a bloodbath overnight, as investors saw what occurred in the US – despite there being no clear catalyst for such a move – and dashed for the exits as fears grow that global risks are mounting and the bill is coming due. While people are naturally pointing to the bond market to explain the sudden panic – most notably Trump who’s been laying the groundwork for blaming the Fed for the last couple of months – I wonder whether the underlying risk in the markets for some time has left market primed for a correction and investors have simply fled at the first sign of danger. Paras Anand, head of asset management for Asia Pacific at Fidelity International, argues the sell-off in America isn’t a shock: “The sharp sell-off in the US has likely caught no one by surprise. If anything, investors have been wondering how, in the face of tighter monetary policy, a contracting labour market and rising oil prices, the US has continued to be so resilient. Ouch! European stock markets have plunged to their lowest level in 20 month. The Stoxx 600 index, which tracks the largest shares in the region, has slumped by 1.6% today to its lowest level since the start of February 2017. Every sector is taking a chilly bath: Eurozone stocks are being dragged down the row between Rome and Brussels over Italy’s new budget, on top of today’s other concerns. Housebuilders and financial stocks are among the big fallers in London this morning: Newsflash: Britain’s FTSE 100 index has hit a new six-month low at the start of trading. The wave of selling that began in Wall Street last night, and swept through Asia today, has now reached the City. The Footsie has shed 113 points, or 1.58%. That takes it down to 7032 points, its lowest level since early April. Nearly every share has fallen. One rare exception being gold miner Randgold (as traders scramble for safe-haven assets). David Madden of CMC Markets says: The prospect of higher interest rates has left trader worried, as it means higher borrowing costs for companies and individuals. Homebuilders are under pressure as mortgage rates are likely to increase. Retailers are suffering for the same reason. Investors in Asia are reeling after a rather brutal day in the markets. China’s Shanghai index is now down over 6%, as worries over the US trade war intensify. Chinese stocks have now lost more than a fifth of their value this year. Naeem Aslam of Think Markets fears that the sell-off will continue: This slump is not going to be over that easily as Asia have already borne the burnt of this year’s trade war, which is fuelled with nothing but uncertainty. The Chinese markets are already in the bear territory so I expect the U.S. markets to continue to face the selling pressure. Boom! Christine Lagarde, the head of the International Monetary Fund, has waded in. Speaking at the Fund’s meeting in Bali, Lagarde insisted that it was “legitimate and necessary” for the Federal Reserve to be raising interest rates. That’s a rebuke to Donald Trump’s claim that the Fed is going crazy. Touching on the slide in the markets, Lagarde pointed out that US stocks have hit record levels recently – suggesting that a correction should be expected. “It is fair to observe and all people are observing that the US equity market and stock markets in general have been extremely high”. The FT has more details. Hussein Sayed, chief market strategist at FXTM, argues that Trump must take some of the blame for the market losses: While I agree with President Trump that Wednesday’s selloff is the fault of the Fed, he should be reminded that the trade war he started with China and re-imposing sanctions on Iran is also to blame. His actions helped building inflationary pressures and the Fed cannot stand still when it sees the economy overheating. A steeper selloff in equity markets will probably lead to a pause in hiking rates, but the Fed will be more concerned about the overall economy performance than just equity prices. The widening rift between the US and China is driving shares down, says J.P. Morgan Asset Management global market strategist Marcella Chow: Headlines around the broadening US-China conflict also continue to worsen as the U.S. arrested and extradited a Chinese official in Belgium to face espionage charges. There are concerns over a 3Q earnings rise following recent profit warnings and weak reports. In particular, Fastenal’s CEO said the trade war with China is raising material costs that will crimp profit margins and hurt US consumers, and French luxury goods maker LVMH confirmed Chinese border guards are more actively searching travelers’ suitcases for undeclared goods added to fears of a slowdown in spending by Chinese consumers. Charles Ripley, senior strategist at Allianz Investment Management, blames the prospect of higher interest rates: “Today’s equity selloff is a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell. Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that.” Ari Shrage, chief executive of Aliya Capital, agrees: “This is much more interest-rate related than anything going on specifically with tech. Interest rates are moving higher, so stocks that are the most expensive typically are the ones that roll over. Steven Friedman, senior economist at BNP Paribas Asset Management, points to recent falls in the value of US government debt (or Treasury Bills). That has pushed up the yield on these bonds – a sign that investors expect inflation and interest rates to rise The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook. It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion.” Good morning from London. World stock markets are sliding today as the anxiety that has been building in recent days explodes into a wave of selling. Shares have fallen sharply across Asia, after Wall Street suffered their worst sell off in eight months overnight, wiping 800 points, or 3%, off the Dow Jones industrial average. The rout has sent Japan’s Nikkei into a tailspin, shedding 4%. Stocks in Hong Kong are down 3.8%, and there are chunky losses in Australia (-2.8%) and South Korea (4%) too. My colleague Martin Farrer explains from Australia: A jittery, volatile week on global financial markets has burst into a frenzy of selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing US interest rate hikes as “crazy”…. “It’s a bit of a bloodbath,” said Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial in New York. “It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies.” European markets had already endured a bad week, and it’s about to get worse. Traders are predicting that Britain’s FTSE 100 will plunge to a new six-month low this morning, perhaps shedding more than 100 points. The rout is being fuelled by concerns that US interest rates are heading higher, as the Federal Reserve tries to keep a lid on American inflation. Donald Trump added to the pressure overnight, branding the Fed ‘crazy’ for planning to keep raising interest rates in the months ahead. Trump told reporters in Pennsylvania that: “The Fed has gone crazy. “No, I think the Fed is making a mistake. They’re so tight.” “It’s a correction we’ve been waiting for, for a long time, but I really disagree with what the Fed is doing.” The president neglected to mention that its his relaxed fiscal policy, and recent tax cuts, are one factor pushing Federal Reserve governors to hike. Worries over the US trade war with China (another Trump ‘achievement’), are also worrying investors, after the IMF slashed its growth forecasts earlier this week. Kit Juckes of French bank Societe Generale says Wall Street has finally caught up with events: For much of 2018, the US economy has been oblivious to a turn in the global economic cycle, and the US equity market has been unaffected as emerging market equities and currencies have come under pressure. This week has seen the S&P, and the Nasdaq, sit up and pay attention to what’s going on. The President’s criticism of the Fed adds colour, but no real substance to the situation. Later today we get new US inflation figures, which could also move the markets. If price pressures keep mounting, the Fed will feel that it needs to keep raising borrowing costs, despite chuntering from the White House. The agenda 9.30am BST: Bank of England survey of credit conditions 1.30pm BST: US consumer price inflation for September 1.30pm BST: US weekly jobless figures 18014 false false Traders on the floor of the New York Stock Exchange last night, as shares slid. The closing bell of the New York Stock Exchange on October 10, 2018. An electronic stock board showing Japan’s Nikkei 225 index and other markets, in Tokyo. Stock prices are seen at the Australian Securities Exchange (ASX) in Sydney, New South Wales. China stock market
epa07084892 A Chinese man watches an electronic board showing the stock index and prices at a securities brokerage in Beijing, China, 11 October 2018. Stock markets across Asia plunged after the Dow Jones fell over 800 points overnight. EPA/ROMAN PILIPEY Madrid’s Stock Exchange today. Investors at a stock exchange in Hangzhou today. The FTSE 100 over the last year Biggest fallers on the FTSE 100 today The FTSE 100 over the last year A stock indicator board for the Tokyo Stock Exchange in Tokyo today. International Monetary Fund chief Christine Lagarde today

This article provided by NewsEdge.