Lucy Harley-McKeown
European, FTSE 100 and US stocks drop as market selloff deepens
How major markets are performing on Monday
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The FTSE 100, European and US stocks followed the market mood music on Monday, dipping following a selloff in global stocks last week. Moves lower, including a 12.4% dip for the Nikkei, have been partially triggered by lacklustre employment numbers published in the US on Friday and falling confidence in how the Federal Reserve has managed interest rates.
The FTSE 100 (^FTSE) fell 2.4% by the closing bell. Germany's DAX (^GDAXI) was down 2.4% and the CAC (^FCHI) dropped 2% in Paris.
The pan-European STOXX 600 (^STOXX) was 2.6% in the red.
Over in the US, the S&P 500 (^GSPC) fell 2.5%, the DOW (^DJI) dipped 2.4% and the tech-heavy Nasdaq (^IXIC) declined 2.7%. Indexes recovered somewhat having lost as much as 5% of their value earlier in the session.
Wall Street's "fear gauge" — the CBOE Volatility Index (^VIX) — soared, reaching its highest level since the early days of the COVID-19 pandemic. US treasury yields plummeted, with the benchmark 10-year treasury yield (^TNX) sinking below 1.1%.
Two companies that were especially feeling the heat on Monday were Nvidia (NVDA) and Apple (AAPL). The Nasdaq's chip darling dropped 11% at the opening bell — later trading around 5.5% lower, while the iPhone maker was 3.4% lower after Berkshire Hathaway nearly halved its stake.
Employment figures published on Friday spooked US investors, pushing the three major indexes lower as market watchers speculated that the Federal Reserve has left it too late to cut its key interest rate. The Nasdaq is now in correction territory, more than 10% below its recent high in early July.
The data showed the US economy added 114,000 jobs in July, when economists had expected 175,000. The unemployment rate stands at 4.1%.
The Nikkei's dip was partly sparked by the Japanese central bank raising its key interest rate on Wednesday.
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Market selloff crashes brokerage websites
Interest in markets today is so much that even brokerage websites are buckling under the pressure of activity.
According to Down Detector, reports of outages or problems at Charles Schwab, Fidelity, Vanguard, Ameritrade and E-Trade rocketed in the hour after US markets opened. Retail trading platform Robinhood was also among casualties.
Credit: Down Detector Magnificent Seven erase almost $1trn as selloff worsens
According to Reuters, the combined 'mag 7' — the seven most heavyweight stocks in the Nasdaq — have lost almost a trillion in market value at the open, putting a pin in a months-long rally.
Apple was among the worst hit, as Warren Buffett's Berkshire Hathaway significantly reduced its Apple position, spooking investors.
Chip darling Nvidia, which had ridden the AI boom to the top of the index in recent months, was at one point down more than 11%.
UK services growth accelerates in July, but price pressures remain
The top lines from the UK PMI report, published this morning, were:
Demand for UK services rises at fastest pace since May 2023
Business confidence rebounds to five-month high
Price pressures remain strong
"With the general election period coming to an end at the start of July, survey data for last month showed the UK service sector enjoyed a modest rebound after a fairly subdued end to Q2," said Joe Hayes, principal economist at S&P Global Market Intelligence.
The Business Activity Index crept up only slightly, but the New Business Index jumped by over three points to its highest level in 14 months as firms reported an influx of new clients and contracts.
"July's accelerated expansion in sales activity crucially suggests business and consumer confidence has improved, and albeit only one month into the second half of 2024, the latest survey results bode well for a reasonable GDP growth print in Q3," added Hayes.
"Still, there continues to be sluggish progress on inflation. The positive takeaway is that price pressures, both regarding input costs and output prices, are at their lowest since early 2021. The concern, however, will be that the respective PMIs are still well above their prepandemic trends, and these are the benchmarks for the Bank of England to hit before claiming the fight against inflation is over."
How US stocks are faring at the open
Bitcoin double dip
Bitcoin was trading around 13% lower against the US dollar on Monday, with prices grazing the $50,330 mark at one point, as volatility rocks the market. It has knocked more than $15,000 off its price in the last week and is now trading at its lowest level since February. It had also whipsawed at the weekend.
The crater comes as evidence mounts that the US economy is on shaky footing. The much watched US jobs report last week led to a market-wide dip, with prices across a range of industries taking the heat as the data missed expectations. Uncertainty around Federal Reserve rate cuts as well as the US election outcome is also a factor driving the price wobble.
Market data showed outflows from bitcoin exchange-traded funds (ETFs_ had hit the hundreds of millions last week, as investors look to less risky assets for safety.
Next Bank of England cut in November?
Enrique Diaz-Alvarez, chief financial risk officer at global Ebury looks at the BoE's next moves and the pound:
"The Bank of England cut rates by 25 basis points last week, as we and most strategists expected, although the vote was a very balanced 5-4 in favour of an immediate cut.
"The move was seen as ‘hawkish cut’, however, as the MPC refused to commit further or provide any forward guidance, although it did warn that it would not cut rates too fast or too deep.
"We think that this is consistent with cuts at every other meeting, with the next one likely to follow in November.
“Sterling held up quite well amid market volatility and a generalised flight to safety, ending the week within 0.5% of where it began it against the dollar and down a bit more against the euro.
“No news of note will be released in the UK this week, but we continue to think that resilient demand, relatively high rates and the prospects for closer UK-EU relations bodes well for the pound.”
What to watch when markets open later: Disney
Walt Disney stock was down almost 3% in premarket trade on Monday. (Getty) (Gary Hershorn via Getty Images) Walt Disney stock was down almost 3% in premarket trade on Monday ahead of its earnings report. Wall Street analysts expect the entertainment behemoth will report quarterly earnings of $1.20 per share, pointing to a year-over-year increase of 16.5%.
Forecasts also say revenues will hit $22.86bn, an increase of 2.4% compared to the same quarter a year ago. The consensus earnings-per-share estimate has actually been revised up for the quarter over the last 30 days by 0.3%.
Earlier this month workers in the US came to a pay deal with the conglomerate, as union action averted its first strike in around 40 years.
Meanwhile, the Mickey Mouse creator said it would lay off about 2% of its workforce in its Disney Entertainment Television devision ahead of its Q3 earnings, Adweek reported.
Summer of volatility ahead?
From IG's chief market analyst Chris Beauchamp this morning:
"Volatility as measured by the Vix is at a two-year high, as the index earns its moniker of 'the Fear Index'.
"Wall Street [futures show] a fresh wave of selling is on the cards. Investors continue to flee tech stocks, and the Nasdaq 100 is expected to open down 1000 points lower from Friday's close, a loss of over 5%.
"This is a perfect demonstration of what happens when everyone tries to sell at once. Such moves don't stop in a single day and we likely have a summer of volatility ahead of us, particularly as we await developments in the Middle East."
Pershing Square top FTSE faller
Bill Ackman's Pershing Square is the biggest loser in the FTSE 100 this morning following news last week that the firm will withdraw from listing on the New York Stock Exchange. The IPO would have allowed investors to buy into a portfolio of roughly a dozen stocks of his choosing.
Ackman had spent the last seven weeks road-showing the deal to investors, according to the New York Times.
The deal was scaled back from a raise of $25bn, to $10bn and then to $2bn, before being cancelled outright.
Today the London listed Pershing Square is down 6.1%.
UK chancellor heads to North America
Chancellor Rachel Reeves sets off on a trip to New York and Toronto today, and will meet with CEOs and senior representatives from major players across the US and Canada’s foremost industries, according to a government release. The trip is to highlight "the UK an attractive destination for investment" it said.
While in New York, the UK’s first female Chancellor of the Exchequer will meet with Wall Street leaders and host a reception to celebrate women in finance. The US is the UK’s biggest financial services trading partner, with UK exports to the US valued at ￡23.4bn annually.
In Toronto, the Chancellor will meet with names in the world of clean energy and infrastructure.
The United States is the largest source of foreign investment in the UK and the UK is the third largest investment destination for Canadian companies, whom invested more than $73 billion of FDI stock in 2021.
Monday trade in Asia
European traders are waking up to a deepening global selloff, with Asian stocks following Wall Street's Friday knock lower.
The Nikkei (^N225), in particular, took a beating, down 12.4%, or 4,451 points in the session. The drop marks its worst two-day decline ever, having clocked a more than 18% dip across Friday and Monday. Stocks have been dipping in Japan since the central bank upped its benchmark rate on Wednesday.
The Hang Seng (^HSI) in Hong Kong also dipped 2.1% and the SSE Composite (000001.SS) was down 1.5%.
What to watch in the US
Wall Street's busiest week of the summer sent stocks tumbling as a weak July jobs report surfaced concerns over the health of the US economy and Big Tech earnings failed to ease investor fears.
For the week, the S&P 500 (^GSPC) fell more than 2.5%, while the Nasdaq Composite (^IXIC) fell over 3.7%. This drawdown in the Nasdaq sent the index into a correction after closing more than 10% from its latest high reached on July 10. Meanwhile, the Dow Jones Industrial Average (DJI) also slid about 2.5%.
The week ahead won't provide much new macroeconomic fodder for investors, with updates on activity in the services sector and weekly jobless claims expected to be the main releases in focus.
Here's what stocks are doing in premarket:
Good morning
Hello from London. Lucy Harley-McKeown here, gearing up for another day of business news.
Today we've got UK and US PMIs, which will give a read on the health of the manufacturing sector. In that avenue, there's also fresh EU PPI data on the horizon today.
On the corporate front there are earnings from Airbnb (ABNB), SuperMicro Computer (SMCI), Disney (DIS), and Eli Lily (LLY).
Markets are still digesting central bank action from last week, too. Let's get to it.