Global stocks extend biggest sell-off since 2016

Investors remain spooked by threat of inflation in US

Global stocks extended the biggest sell-off since 2016, with European, US and Asian shares continuing last week’s decline.

Equity investors are looking for confirmation that recent declines represent the healthy correction many had expected after the stellar start to the year, but moves on Monday suggested the sell-off was not done yet. The fresh downward move was sparked by US wage data on Friday that pointed to quickening inflation, which would lead to higher rates and therefore rising borrowing costs for companies.

Elsewhere, oil extended declines after US explorers raised the number of rigs drilling for crude to the most since August. Bitcoin also slid below $7,500.

The Iseq dropped nearly 2 per cent or 130 points to 6,754 in tandem with shifts in other markets. Ryanair proved one of the main anchors, falling 2.4 per cent to €15.74 as fears of further strike action trumped the airline's pledge to return €750 million to investors in a share buy-back scheme. Swiss-Irish food group Arytza had another horrid session, dropping 6.6 per cent to €21 following a string of bad news stories and several broker downgrades. Shares in the firm have fallen more than 30 per cent in the past two weeks.


In line with other financials across Europe, AIB fell 2.6 per cent to €5.28 but rival Bank of Ireland held up well, dipping only 0.3 per cent to €7.83.

Amid fears over the US economy, CRH, which has significant operations in the US, fell 2.3 per cent to €28.23.

The UK's top share index fell to its lowest level in around two months on Monday as worries over inflation and rising bond yields took their toll on global equity markets and a survey showed Britain's economy slowed sharply in January. The FTSE lost 1.4 per cent and is down more than 4.5 per cent year to date, partly weighed down by a continued recovery in the pound from post-Brexit lows. This session was the fifth consecutive day of losses for the index, its longest losing streak since November, in a broad-based sell-off where only a handful of stocks were trading in positive territory.

Consumer staple stocks were the biggest weight on the FTSE, taking a combined 27 points or more off the blue-chip index. Among the few stocks which ended the day in positive territory were miners Antofagasta Glencore and Anglo American, up 1.6 per cent, 1.1 per cent and 0.3 per cent respectively as the sector found support in a rebound in metal prices. Randgold posted the worst performance of the index after it reported 2017 profits and said it would participate in a campaign to overturn a new mining code in the Democratic Republic of Congo. An outperformer was Kingfisher, which rose 2.3 per cent to the top of the FTSE. Traders said the stock was supported by hopes for an easing of competition after rival Wesfarmers wrote off British hardware chain Homebase for more than its purchase price, saying it had made a series of mistakes

European markets were enduring a rough ride on Monday, as the Cac 40 in France dropped 1.5 per cent and Germany's Dax lost 0.8 per cent.

David Madden, market analyst at CMC Markets, said: "European markets are firmly in the red as the global sell-off in stocks has taken hold.

“Ever since the US posted strong average earnings last Friday, traders have been rattled by the prospect of tighter monetary policy around the world.

"Economic indicators in the US, Europe and Asia point for a need to tighten up monetary policies from various central banks," he said.

US stocks were trading lower in early afternoon on Monday as bond yields continued to hover near multi-year highs and losses in energy and financial stocks weighed.

The S&P energy index led the decliners among the 11 major S&P sectors, with a 2.03 per cent fall. Exxon's 4.1 per cent fall weighed the most on the Dow and was the second biggest drag on the S&P. Oil prices neared their lowest in a month as rising US output and a weaker physical market added to the pressure from a widespread decline across equities and commodities. Wells Fargo fell 8.1 per cent after the Federal Reserve imposed new regulatory restrictions over compliance issues. The fall weighed on other bank stocks with Bank of America , Goldman Sachs and Citigroup down about 1 per cent.

Shares of Intel rose 1.1 per cent.

Additional reporting by Reuters/Bloomberg

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times