In a session reminiscent of October 2008, US stocks suffered steep losses overnight as European debt concerns skyrocketed following confidence sapping comments from the ECB.
If things weren’t bad enough, it appears a series of erroneous trades sparked a mid-afternoon plunge in US indices, with the Dow trading down more than 1000 points as a number of stocks registered lows of $0. Authorities are still investigating the causes.
At the closing bell, the NASDAQ was the worst performer, down 3.4% while both the Dow Jones Industrial Average and S&P 500 were 3.2% lower.
These concerns over Europe have taken a big turn for the worse. The comments from the ECB overnight that it wasn’t even considering the purchase of Eurozone government bonds eroded a lot of confidence. At the end of the day, we’re talking about countries going bust, not companies. The ECB missed a prime opportunity to boost confidence. It’s far too reactive rather than getting on the front foot.
In Asia, regional markets are sharply lower following tumultuous leads from the US where heavily computerised selling compounded earlier falls triggered by the escalating fears in the Eurozone. Having said that, Asian shares are off their lows as the bargain hunters move in. As at 06:00, the Nikkei is the biggest detractor, down 2.9% while the Hang Seng, Kospi and Shanghai Composite are all weaker between 0.7% and 1.7%.
In Australia, the ASX 200 has seen a massive rebound off the lows of 4427 to current levels of 4522 – only down 50 points or 1.1%. This is far removed from the bloodbath we encountered earlier in the session. Surprisingly, materials are the best performing sector, actually trading in positive territory, while financials, healthcare and telecommunications are the biggest drags on the index.
The London markets are going to start the week’s final session with something of a hangover, not as a result of traders celebrating a decisive vote in the UK election but as the prospect of a hung parliament continues to linger and they also have the nightmare on Wall Street to unpick. There’s still no definitive justification for precisely what happened in the US last night but the general equities sell-off as contagion fears spread combined with what looks like some erroneous trade had what can be best described as disastrous consequences.
There was some kind of rebound ahead of the close but European markets will still be playing catch up at the open and banks seem likely to remain at the forefront of any continuation in the sell-off. There’s also the fact that there’s still no definitive result in the UK election and although the Conservative party may yet get the most votes, convention states that they won’t have the first opportunity to try and form a government. The longer any political discussions drag on, the more nervous financial markets can be expected to become, standing to weaken further both Sterling and UK equities.
Ahead of the open we’re calling the FTSE down 107 at 5154, the DAX down 121 at 5787 and the CAC down 104 at 3452.
