Global equities markets on course for worst week since March tumult

European stocks and US futures drop after Big Tech earnings fail to appease investors

Equities markets were set to cap a volatile trading week on a gloomy note on both sides of the Atlantic after broadly upbeat earnings from America’s tech giants failed to impress investors.

The Europe-wide Stoxx 600 index was down 0.2 per cent in morning trading on Friday, while Frankfurt’s Dax fell 0.3 per cent and London’s FTSE 100 lost 0.2 per cent.

MSCI’s broad gauge of stocks in developed and emerging markets around the world has shed 4.5 per cent this week — the heaviest sell-off since concerns about coronavirus gripped markets in March.

Wall Street futures pointed to steeper losses still: futures following the tech-heavy Nasdaq 100 index were down 2 per cent, and those tracking the broader S&P 500 dropped 1.5 per cent.

The latest bout of selling came even after Alphabet, Amazon, Apple and Facebook revealed quarterly results after the close of trade on Thursday that showed sales climbing more swiftly in the third quarter than analysts had been expecting.

The share prices of the quartet of large technology groups have soared this year, helping to fuel a nearly 25 per cent rally in the Nasdaq Composite despite pressure caused by the pandemic. But shares in Amazon, Apple and Facebook were all down in pre-market trading.

The fall in equities across the board this week has been a "run of the mill, short-term correction", with investors taking profits from "winning positions" such as big tech stocks, said George Lagarias, chief economist at Mazars.

The fact that bond prices had not substantially climbed indicated that traders were not yet “fully de-risking portfolios” and the equity market might rebound quickly after a temporary “risk off episode,” he added.

Jim Reid, strategist at Deutsche Bank, pointed out that big tech stocks were vulnerable to sharp rises and falls as traders reassessed their outlook for the US economy in general and the sector in particular.

This week's decline in global equities also comes as investors have grown increasingly worried about sharply rising coronavirus case counts in western Europe and the US. Christine Lagarde, president of the European Central Bank, warned on Thursday that the risks to Europe's economy were "clearly tilted to the downside".

Expectations for volatility following next week’s presidential election represent yet another headwind confronting global investors. Wall Street’s Vix volatility index traded at 39 on Friday, double its long-term average.

“As election week approaches, markets are now focused on what could go wrong,” said Joyce Chang, global research chair at JPMorgan, in a note to the Wall Street bank’s clients.

She added: “Markets have been anticipating post-election reflation in the global economy into 2021, but there is room for disappointment if wild card scenarios materialise.” – Copyright The Financial Times Limited 2020.