It’s been a negative start to the second quarter for stock markets with European bourses beginning lower after the US experienced some sizable selling yesterday.
Unlike their European counterparts US exchanges were open on Easter Monday, with stocks across the Atlantic making their worst start to April since 1929 - the year of the Wall Street crash which preceded the Great Depression. The declines can be attributed to escalating concerns surrounding trade wars and further weakness in tech stocks. The negative risk sentiment has spilled over and can be felt in London this morning with the FTSE 100 threatening to break back below the 7000 level and off by more than 50 points.
US stocks testing key level
A decline in excess of 2% for the S&P500 on Monday was the worst start to a quarter since October 2011 and saw the benchmark end the day below its 200 day simple moving average for the first time in almost 2 years. Broader risk sentiment remains subdued as Chinese tariffs on US products have come into effect, with Beijing imposing levies on approximately $3 billion worth of US goods, and traders are now watching very closely for any further signs of escalation from Trump in retaliation.
Tech leads the losers
The US president remains a major driving force for the markets and a scathing attack over the weekend on Amazon (NASDAQ:AMZN) saw the tech giant fall over 5% in Monday’s session, wiping $35B from its market value.
Tesla (NASDAQ:TSLA) also dropped more than 5% at the start of the week as the firm’s troubles continue to mount with quarterly production of the Model 3 sedan expected to miss its target of 2500. The bad news comes not long after a fatal crash involving one of its driverless cars and the US watchdog looking into the accident has rebuked Tesla for making public details of the probe before it has concluded its investigation.
April Fools poorly received
Taking to Twitter on Sunday, Tesla CEO Elon Musk posted a series of April Fools jokes regarding the solvency of the firm that have clearly not amused some investors given the large negative free cash flows seen presently. Whilst it is admirable to show a sense of humour in the face of adversity, Musk’s tweets appear to have struck a nerve with some, especially given that the firm’s continued losses and difficulties tapping the bond market are seen as very real threats to its future performance - which some investors quite rightly see as no laughing matter.
A spokesperson has this morning offered some good news however, with comments that the Model 3 production is the 'highest priority' seeing a rise of more than 1% in pre-market trade as the stock looks to recoup some of its recent declines.
UK Manufacturing beats forecasts
The latest macro data for the UK has come in better than expected with the manufacturing PMI for March beating forecasts. A print of 55.1 was slightly better than the 54.8 consensus prediction and extends the run of consecutive above 55 readings to 9. Given that 2 of the past 3 prints for this indicator have missed forecasts, the beat is all the more pleasing although traders will likely look more to Thursday’s services equivalent in attempting to gauge the strength of recent economic activity.