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Global Markets Retreat as Tech Rout Spreads - EMEA Brief 21 Nov

Guest JoeIG


  • FAANG stocks have now shed more than $1 trillion in market value since recent highs, whilst Target leads the fall in retail as its shares dropped 10.5% yesterday after posting worse than expected earnings figures.
  • The Nasdaq ended the day down 1.7%, whilst the S&P was down 1.8%. The Dow Jones dropped 550 points to close on Tuesday, erasing this year’s gains as it moved into negative territory.
  • Asian stocks slipped on Wednesday as intensifying fears on global economic growth and trade tensions grip the markets. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.45%. 
  • The ASX lost 0.5%, South Korea's KOSPI fell 0.4% and Japan's Nikkei retreated 0.35%.
  • Oil has bounced back around $1 a barrel to regain some of yesterday’s 6% plunge, backed by a report of an unexpected decline in US crude inventories. US crude currently trading at $54.31, Brent crude at $63.54.
  • Gold is steady at around $1223 an ounce.
  • Bitcoin fell as much as 16% yesterday, to its lowest level since September 2017. Pressure builds on regulators to increase oversight on cryptocurrencies.

Asian overnight: Another bearish session in Asia has seen declines throughout Japan, and Australia, with Chinese and Hong Kong markets ending up flat on the day. However, those losses could have been much worse, with much of the indices declining heavily in early trade, only to erase much of those losses throughout the latter part of the session. Meanwhile, crude prices took another dive overnight, after Donald Trump came out in support of Saudi Arabia in a written statement. It is clear he values the economic benefit of their relationship over the killing of Jamal Khashoggi, and thus the Saudi leadership could be more willing to listen to Trump over his desire to drag oil prices lower.

UK, US and Europe: The sharp sell-off of US technology stocks widened into a global market retreat on Tuesday, underpinned by fears surrounding continued trade tensions, slowing economic growth and weak corporate earnings in the US. Investors worry over sales of Apple’s flagship product, the iPhone, will slow down in light of recent reports that demand for the tech giant’s products in China has declined. This comes in addition as Goldman Sachs slashed its price target on Apple on Tuesday. Short term, unexpected weakness in the technology sector could have a significant impact on the global economy, adding to an already volatile macro environment.

In Europe, we are once again on the lookout for the magic 48th letter to spark a vote of no confidence against Theresa May, while the PM herself goes to Brussels to speak with Jean-Claude Juncker as both sides attempt to finalise a Brexit deal in time for Sunday’s summit of European leaders. Stumbling blocks still remain in the withdrawal agreement, over UK’s access to the EU single market and the issue of maintaining a soft border in Ireland. Looking ahead, public sector net borrowing from the UK forms the other notable event of the European session. In the afternoon, watch out for core durable goods, unemployment claims, and crude inventories from the US.

Economic calendar - key events and forecast (times in GMT)


Source: Daily FX Economic Calendar

1.30pm – US durable goods orders (October): orders to fall 1.8% MoM, and excluding transport to rise 0.2% MoM. Markets to watch: US indices, USD crosses

3pm – Univ of Michigan confidence survey (November): index to fall to 98.3 from 98.6. Markets to watch: US indices, USD crosses

3.30pm – US EIA crude inventories (w/e 16 November): stockpiles to rise by 1.7 million barrels. Markets to watch: Brent, WTI

Corporate News, Upgrades and Downgrades

  • Renault appoints COO, Thierry Bollore, as interim CEO while allegations against CEO Carlos Ghosn are investigated.
  • Engineering firm, Babcock International’s gross profit has fallen 64% to £65.1m in the half year September.
  • Chinese electronics giant Xiaomi is set to boost its operations in India from 500 to 5000 stores by the end of 2019.
  • United Utilities said that first-half pre-tax profit rose 7.7% to £212.5 million, while revenue was 4.6% higher at £916.4 million.
  • Sage reported a 16% rise in full-year pre-tax profit, to £398 million, and revenue rose 7.6% to £1.85 billion.
  • Kingfisher saw like-for-like sales fall 1.3% in Q3, as weakness in France hit performance. The firm also unveiled a £50 million share buyback programme. 

Ahold Delhaize raised to buy at Kepler Cheuvreux
British Land upgraded to buy at HSBC
CYBG upgraded to buy at Shore Capital

NegAustrian Post downgraded to sell at Berenberg
Indivior downgraded to sector perform at RBC

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