It was a dark day for European shares, as growth jitters and Brexit turmoil conspired to send equities careening to some of the worst losses in recent memory.
In the UK, the FTSE 100 plunged more than 3% Wednesday. It was the biggest single-session slide since January of 2016.
You can largely thank Boris Johnson for the rout. In a keynote address at the Conservative Party conference, Boris essentially threatened Brussels, as though he’s somehow negotiating from a position of strength. “I hope very much that our friends… compromise in their turn”, he said, adding that “if we fail to get an agreement because of what is essentially a technical discussion of the exact nature of future customs checks… then let us be in no doubt that the alternative is no deal”.
Market participants were “in no doubt” about how to receive the latest hardline rhetoric from a prime minister who was judged by the UK’s highest court to have illegally suspended Parliament last month. The verdict from investors was “guilty”, and the punishment was a 3.2% bloodbath.
In an interview with The Sun, Johnson set out an October 11 deadline for EU negotiators to agree to a deal. Again, he is no position to be making demands.
For European equities more broadly, Wednesday was a disaster. The Euro Stoxx 50’s 3% decline was the third-worst daily drop since Brexit.
Not helping sentiment across the pond was the threat of imminent US tariffs after the WTO green-lighted duties on some $7.5 billion in EU goods (annually) in retaliation for Airbus subsidies.
“Fears of a US economic slowdown may be more damaging to European stocks than their US peers if the first two trading days of October are any guide”, Bloomberg’s Heather Burke wrote on Wednesday afternoon, noting that “European equities are habitually unloved, and signs of a global slowdown will naturally make fence-sitting investors push the sell button”.
And “push the sell button” they did. Have a look at this:
That’s pretty rough, and suggests that European shares are in no mood to digest the realization of a no-deal Brexit or further evidence to support the contention that the economic weakness plaguing the bloc has crossed the Atlantic on the way to deep-sixing the longest expansion in US history.