The Friday FAAMG volatility is spreading to overseas markets on Monday, as tech stocks underperform globally, weighing down Asian and European equities.
The Stoxx 600 was down right out of the gate and would eventually test its 50-day moving average as the tech sector index SX8P fell as much as 2.7% on the session. “Sector valuation concerns are spreading from U.S. and Asia,” Bloomberg notes. The VSTOXX jumped 5%.
The risk-off mood gathered a bit of steam as the overnight session wore on with the yen rising and Treasury yields falling notably after Europe got started.
Bund futures rose as USDJPY dropped with stock futures as traders described flows as “mixed.”
With tech shouldering a disproportionate share of the burden this year in terms of driving the equity rally, it looks like things may now be going into reverse.
“There’s a chance U.S. internet technology stocks that have propelled a global stock rally will now serve as a buzz kill,” Mitsuo Shimizu, deputy general manager at Japan Asia Securities in Tokyo said this morning.
Meanwhile, the pound drifted lower as political uncertainty weighs.
“Theresa May’s Conservative Party is expected to form a minority government with the Democratic Unionist Party’s support, without a formal coalition or pact,” Moody’s said in a new report, adding that the “election result increases fiscal risks and will hamper Brexit talks.” The outcome, the ratings agency says, is credit negative.
In the Mideast, the Qatar chaos continued with 12-month riyal forwards climbing 81bps in early Doha trading to 625 against the dollar, the highest level since at least 2001. Fitch isn’t optimistic, and placed Qatar on watch for downgrade, citing “heightened uncertainty resulting from decision of Saudi Arabia, the United Arab Emirates, Bahrain, Egypt and some other Arab countries to sever diplomatic and logistical ties.”
Qatar’s finance minister wants you think there’s nothing to see here. It’s “business as usual in Doha,” Ali Shareef Al Emadi told CNBC.
“Our reserves and investment funds are more than 250 percent of gross domestic product, so I don’t think there is any reason that people need to be concerned about what’s happening or any speculation on the Qatari riyal,” he added. “We are extremely comfortable with our positions, our investments and liquidity in our systems.”
And then he made a fun threat: “A lot of people think we’re the only ones to lose in this. If we’re going to lose a dollar, they will lose a dollar also. “We are going to make sure that we are even more diversified than we were before.” For more on the dollar crunch and “diversification,” see “‘Send Your Savings To Me Now’: Qatar Hit With Dollar, Food Shortage Amid Bank Squeeze.”
Oh, and Palladium traded near its highest intraday level since 2001 (see here for background on the short squeeze). “Palladium is continuing to ride high as it has done in recent weeks,” Commerzbank analysts say in a note. “The fact that Chinese passenger car sales were down again in May is having no impact on the price, at least for the time being.”
Here’s a snapshot of global equities:
- Nikkei down 0.5% to 19,908.58
- Topix down 0.01% to 1,591.55
- Hang Seng Index down 1.2% to 25,708.04
- Shanghai Composite down 0.6% to 3,139.88
- Sensex down 0.7% to 31,048.15
- Australia S&P/ASX 200 up 0.02% to 5,677.80
- Kospi down 1% to 2,357.87
- FTSE 7519.96 -7.37 -0.10%
- DAX 12704.10 -111.62 -0.87%
- CAC 5247.61 -52.10 -0.98%
- IBEX 35 10850.90 -127.40 -1.16%