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LONDON: Global equity markets slid for the second day in a row on Friday as a weekly wipeout of nearly $1 trillion in high-tech stocks outweighed hopes of a slower rate hike in the Fed and ECB and on the news that the US economy is not in recession.
European stocks and Wall Street futures were both 0.5% lower as Thursday’s weak forecasts from Amazon and Apple sent Europe’s tech sector down more than 2% and the outlook for new COVID-19 restrictions in China hit mining and oil companies.
In bond markets, borrowing costs were also starting to climb again, although what analysts described as a dovish ECB meeting on Thursday meant German 10-year Bund yields were set to see their biggest weekly drop since October. 1987.
The yen weakened again after Bank of Japan Governor Haruhiko Kuroda said he had “no plans to raise interest rates or head for an exit (from interest rates). ‘ultra low interest) anytime soon’ despite rising inflation expectations.
Sharp falls in China meant Asia-Pacific shares closed 1.65% lower at 135 points, just above a 2.5-year low hit on Monday.
MSCI’s main global index, which tracks 47 countries, fell 0.5% on the day even though it, like European and US markets, was heading for its third weekly gain in the past four.
It is the disappointing earnings forecast that has hit the markets in recent days.
Amazon.com and Apple were the latest tech giants to face stiff investor penalties over their numbers on Thursday and nearly $1 trillion could be wiped from big US tech giants this week alone .
Facebook’s parent company Meta plunged 25%, taking its year-to-date plunge to 70% or more than $670 billion in value, while Amazon’s disappointing forecast for the season traditionally lucrative parties allowed him to share more than 13% of pre-market trade. .
“If that holds today, it would drop it to a market cap of less than $1 trillion. In November of last year, we were as high as $1.9 trillion, so a hell of a drop, to say the least,” said Deutsche Bank strategist Jim Reid.
Doves and Bluebirds
The tech damage also raised questions about the $44 billion Tesla billionaire Elon Musk eventually agreed to pay for Twitter.
Musk took to Twitter on Thursday night, immediately firing top executives and tweeting that “the bird is out.”
But he provided little clarity on how to achieve the lofty ambitions he has set for the social media platform, including making it a bastion of free speech and a “super app” that offers everything, from money transfers to shopping and taxis.
The BOJ’s widely expected decision in Asian trade to keep policy loose came less than 24 hours after the European Central Bank raised interest rates by 75 basis points, but said “substantial” progress had already been achieved in the fight against inflation.
Investors are now turning their attention to the Federal Reserve meeting next week. While a 75 basis point rate hike at the end of its November 1-2 policy meeting is all but assured, the probability of a smaller 50 basis point hike in December was 55%, according to the report. CME’s FedWatch tool.
“I don’t think there will be any surprises here (in terms of rate hikes), but it will be more about the message the Fed will deliver,” Societe Generale’s Benzimra said.
The less hawkish comments from the ECB bolstered expectations that central banks will need to ease the pace of monetary tightening, especially after the Bank of Canada announced a lower-than-expected rate hike on Wednesday.
Citi strategists say markets have started trading a Fed pivot again, but that’s defined as a rise in smaller increments, not a “proper” pivot from bulls to cuts, noting that an actual pause is still far.
“No Powell Pivot, no Santa?” Citi Emerging Economies analysts asked, referring to the so-called “Santa Claus rally” that markets often see towards the end of the year.
In China, the stock market fell 2.25%, with Hong Kong’s Hang Seng index down 3.6%, rounding off a tough week. Dismal industrial earnings numbers and widening COVID-19 outbreaks all weighed on sentiment.
The dollar index rose 0.3% on the day but fell for the second consecutive week. The euro was back below parity at $0.9944, while the BOJ stance pushed the yen down 0.8% to 147.43 to the dollar.
Oil prices also fell 1.3% to $95.7 a barrel of Brent. But they were also on course for a fourth weekly rise in the past five years and many market veterans see prices remaining around $100 a barrel in the months ahead.