Key Points
- FTSE 100 closing price of 6,947.45, -2.47%
- 99% of stocks in the FTSE 100 finish lower
- GBP/USD buoyant above 1.41 as USD index falls below 90.00
- Oil falls as pipeline fears ease
- Doge jumps after Musk tweet
By Samuel Indyk
Investing.com – The FTSE 100 slumped back below 7,000 on Tuesday amid a global stock sell-off. Indices across the globe were weak after the tech sell-off in the US on Monday continued for a second day.
The theme appears to be stemming from the fear that inflation is just around the corner and the Federal Reserve might be behind the curve, meaning they will need to tighten policy sooner than they have communicated. Various Fed officials are scheduled to speak today ahead of tomorrow’s all important CPI print.
If the Fed is forced to tighten, the feeling is that this will weigh on growth stocks and some tech stocks that have gained lofty valuations while making little to no profit.
“All things being equal higher inflation implies higher interest rates, and higher interest rates are particularly toxic for companies that promise little in the way of profits today, but rapid growth in the years to come,” said Hargreaves Lansdown (LON:HRGV) equity analyst Nick Hyett. “That’s a pretty accurate description of many tech stocks, and the US market is increasingly dominated by US tech names.”
In UK specific news, British Airways parent IAG (LON:ICAG) was at the bottom of the FTSE 100 after the company announced it would be offering an EUR 800mln convertible bond. The offering comes amid hopes that international travel will slowly resume but the need for additional cash may have worried some investors.
Scottish Mortgage Investment Trust (LON:SMT) was also one of the worst performing shares in the FTSE 100 amid the tech rout. The fund has major holdings in the technology sector, including Tesla (NASDAQ:TSLA), Tencent (HK:0700), and Alibaba (NYSE:BABA).
Deliveroo (LON:ROO) was one of the few companies in the UK that traded in the green on Tuesday after the company was initiated with a ‘buy’ rating by Goldman Sachs (NYSE:GS). The US investment bank said they see 70% upside for the company over the coming 12 months.
FX markets were relatively stable but the US Dollar Index did briefly break below 90.00 for the first time since February 25th. The move lower helped keep GBP/USD buoyant after breaking above 1.41 in the wake of the Scottish parliamentary election, where the SNP failed to gain enough seats for a majority.
WTI and Brent crude futures were both trading lower as concerns over the Colonial pipeline hacking appear to have abated. There had been fears that a prolonged shutdown of the pipeline could lift gasoline prices and cause bottlenecks at some hubs. However, the company that operates the pipeline said they hope to restore service by the end of the week.
Cryptocurrencies were weaker with some attributing the move to the Colonial pipeline hacking. The ransomware group that hacked the pipeline demanded payment in Bitcoin and there are some fears that regulators may used incidents like this to clamp down on cryptocurrencies, citing their use for illicit activities.
Dogecoin had also been lower for much of the morning before a tweet from Tesla CEO Elon Musk helped the meme-based cryptocurrency pare losses. Musk asked his almost 54mln followers whether his electric vehicle company should begin accepting Dogecoin as payment. By 16:15BST, an overwhelming 77% have voted ‘Yes’ to the billionaire’s poll.