2018年11月20日 星期二

"A Sea Of Red": Global Stocks Plunge With Tech Shares In Freefall

www.zerohedge.com

While there was some nuance in yesterday's pre-open trading, with Asia at least putting up a valiant defense to what would soon become another US rout, this morning the market theme is far simpler: a global sea of red.

Stocks fell across the globe as worries over softening demand for the iPhone prompted a tech stock selloff across the world, while the arrest of car boss Carlos Ghosn pulled Nissan and Renault sharply lower. Even China's recent rally fizzled and the Shanghai composite closed down 2.1% near session lows, signalling that the global slump led by tech shares would deepen Tuesday, adding a new layer of pessimism to markets already anxious over trade. Treasuries advanced and the dollar edged higher.

S&P 500 futures traded near session lows, down 0.6% and tracking a fall in European and Asian shares after renewed weakness in the tech sector pushed Nasdaq futures sharply lower for a second day after Monday's 3% plunge and crippled any hopes for dip buying. News around Apple triggered the latest bout of stock market selling, after the Wall Street Journal reported the consumer tech giant is cutting production for its new iPhones.

Europe's Stoxx 600 Index dropped a fifth day as its technology sector fell 1.3% to the lowest level since February 2017, taking the decline from mid-June peak to 21% and entering a bear market. Not surprisingly, the tech sector was the worst performer on the European benchmark on Tuesday, following Apple’s decline to near bear-market territory and U.S. tech stocks plunge during recent sell-off. The selloff was compounded by an auto sector drop led by Nissan and Renault after Ghosn, chairman of both carmakers, was arrested in Japan for alleged financial misconduct. The European auto sector was not far behind, dropping 1.6 percent, and the broad European STOXX 600 index was down 0.9 percent to a four-week low.

“Most of Europe had a red session yesterday and that has been compounded by the news on Apple and tech stocks overnight, The overall climate is risk off,” said Investec economist Philip Shaw. “Beyond stocks, the Italian bonds spread (over German bonds) is at its widest in about a month now, and Brexit continues to rumble on - uncertainty is very much hurting risk sentiment,” he added.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.2 percent, with Samsung Electronics falling 2 percent. In Japan, Sony Corp shed 3.1 percent. Japan’s Nikkei slipped 1.1 percent, with shares of Nissan Motor Co tumbling more than 5% after Ghosn’s arrest and on news he will be fired from the board this week.

Meanwhile, as noted yesterday, the CDS index of US investment grade issuers blew out to the widest level since the Trump election, signaling renewed nerves about the asset class.

Exactly two months after the S&P hit all time highs, stocks have been caught in a vicious decline and continue to struggle for support as some of the technology companies that helped drive the S&P 500 to a record high earlier this year tumbled amid a slowdown in consumer sales and fears over regulation, many of them entering a bear market.

At the same time, a more gloomy macro outlook is emerging, with Goldman chief equity strategist David kostin overnight recommending investors hold more cash even as it reiterated its base case of S&P 3000 in 2019.

Ray Dalio disagreed, and said that investors should expect low returns for a long time after enjoying years of low interest rates from central-bank stimulus.

“The easy days of long, global bull markets where you can invest in a tracker for five basis points -- I say this as an active fund manager -- and watch the thing go up, I think those days are gone,” Gerry Grimstone, chairman of Barclays Bank PLC and Standard Life Aberdeen PLC, said in an interview on Bloomberg Television. “It’s going to be a move back to value investing, and back to the Warren Buffett-style of investment.”

In the latest Brexit news, UK PM May is reportedly drawing up secret plans to drop the Irish border backstop and win support from angry Brexiteers, while reports added PM May has received agreement from the EU to drop the backstop plan if both sides can agree on alternative arrangements to keep the border open. Meanwhile, Brexiteers reportedly still lack the sufficient number of signatures required to trigger a no-confidence vote against UK PM May, the FT reported. In related news, Brexit rebels reportedly admitted attempts to oust PM May has stalled as Eurosceptic MPs turned on each other. The Telegraph also reported that the confidence vote now appears to be on hold until after Parliament votes in December on Mrs May's Brexit deal.

Sky News reported that the UK government are to publish new analysis before the MPs’ meaningful vote on the Withdrawal Agreement comparing the “costs and benefits” of Brexit. The impact of three scenarios will be measured; no Brexit, no deal, and leaving with the government's draft deal and a free trade agreement.

In rates, Treasuries rose, driving the 10-year yield down to its lowest level since late September, ahead of Thanksgiving Thursday.  Italian government bond yields jumped to one-month high on Tuesday and Italian banking stocks dropped to a two-year low, hurt by risk aversion and concerns over the Italian budget.

Euro zone money markets no longer fully price in even a 10 bps rate rise from the European Central Bank in 2019, indicating growing investor concern about the economic outlook in the currency bloc.

In FX, the Bloomberg Dollar Spot Index whipsawed in early London trading even as it stayed near a more than one-week low on concern cooling global growth will slow the pace of Fed rate hikes, keeping Treasury yields under pressure. At the same time, the pound stabilized as Theresa May appealed to business leaders to help deliver her Brexit deal, and evidence mounted that a plot to oust her as U.K. Prime Minister is faltering.

The euro slid as Italian bonds dropped, pushing the yield spread to Germany to the widest in a month; the currency had opened the London session higher, supported by corporate buying in EUR/GBP. The yen rallied to a month-to-date high as Asian stocks followed a U.S. equity slide while the New Zealand dollar got a boost from a jump in milk production; the Aussie was on the back foot even after the RBA said Australia’s unemployment rate could fall further in the near term. India’s rupee rallied a sixth day after the central bank signaled a compromise with the government in their dispute over reserves.

Bitcoin extended its drop below $4,500 for the first time since October 2017.
WTI crude oil futures hovered around $57 a barrel after oil prices lost steam as fears about slower global demand and a surge in U.S. production outweighed expected supply cuts by the Organization of the Petroleum Exporting Countries. Brent crude slipped 0.9 percent to $66.21 per barrel.

In other overnight news, BoJ Governor Kuroda said there is currently no need to ease further, while he added that there was a need for bold monetary policy in 2013 and now we need to persistently continue with policy. Furthermore, Kuroda suggested that the chance of reaching the 2% inflation target during FY2020 is low. Japanese PM Abe says the next initial budget is to have measures to address sales tax.

India's Finance Ministry sources expect that the RBI will stand pat on rates at its meeting next month.

RBA Governor Lowe states that steady policy is to be maintained for 'a while yet' and it is likely that rates will increase at some point if the economy progresses as expected.

Expected data include housing starts and building permits. Best Buy, Campbell Soup, Lowe’s, Medtronic, Target, TJX, and Gap are among companies reporting earnings.

Market Snapshot
  • S&P 500 futures down 0.8% to 2,676.00
  • STOXX Europe 600 down 0.5% to 353.25
  • MXAP down 1% to 150.89
  • MXAPJ down 1.2% to 481.70
  • Nikkei down 1.1% to 21,583.12
  • Topix down 0.7% to 1,625.67
  • Hang Seng Index down 2% to 25,840.34
  • Shanghai Composite down 2.1% to 2,645.85
  • Sensex down 0.8% to 35,498.94
  • Australia S&P/ASX 200 down 0.4% to 5,671.79
  • Kospi down 0.9% to 2,082.58
  • German 10Y yield fell 1.4 bps to 0.359%
  • Euro down 0.2% to $1.1433
  • Italian 10Y yield rose 10.4 bps to 3.223%
  • Spanish 10Y yield rose 0.3 bps to 1.653%
  • Brent futures down 0.8% to $66.23/bbl
  • Gold spot little changed at $1,223.14
  • U.S. Dollar Index up 0.1% to 96.29

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