Global stock market jitters have returned this week with investors growing increasingly skittish as the rout in US Tech stocks, which began last month, deepens.
A fairly strong rally following the US midterms now appears to be of the 'relief' variety rather than a significant turning point. A broad basket of European shares fell to their lowest level since early 2017 yesterday and while we have seen a bounce this morning the markets remain susceptible to further declines going forward.
Apple (NASDAQ:AAPL) falls into bear market
For much of 2018 FAANG stocks (Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple, Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL)) were the darling of investors, accounting for the lion’s share of gains and driving broader benchmarks to all-time highs. However there’s been a marked shift in sentiment regarding these Tech giants of late as their combined losses from record highs now exceeds $1T.
Apple, often seen as a bellwether for the broader market, lost almost 5% in Tuesday’s session alone and in doing so the stock has now entered into bear market territory - as defined by a 20% drop from it’s high. Before these declines, the US markets had appeared as a beacon of strength and helped to gloss over what was shaping up to be a pretty bad year for stocks elsewhere, but their recent fall has clearly dampened sentiment and this has led to growing talk of a US recession in the not too distant future.
This morning the latest forecasts for global growth next year were trimmed to 3.5% from 3.7% and nearly everywhere you look, people seem to be growing more cautious.
Oil price slides to lowest level this year
In a move reminiscent of the previous Tuesday, yesterday saw some heavy declines in the price of crude oil, with US benchmark WTI, dropping over 7% on the day to fall below $53 a barrel - its lowest level in over a year. There was no immediate catalyst for the declines, but an overall drop in risk sentiment and a rising US dollar did little to help matters.
This afternoon’s EIA inventory release could deliver some badly needed positive news for the market after a fall of around 25% since the beginning of October. Last night saw the private inventory equivalent show an unexpected drop of 1.5M barrels and with a median estimate for today’s number of +2.5M there’s clearly some scope for a downside beat.
The main reason for the fall in the oil price has seemingly been an avoidance of a supply shock from Iranian sanctions, which led to a dramatic shift in positioning as funds who had bought in anticipation of this, sold out to exit. Another contributory factor has been the recent run of increases in US stockpiles of crude, with the EIA release showing 8 consecutive weekly builds culminating in a mammoth 10.3 million barrel rise last time out.