
LONDON, – World stocks declined on Friday as economic uncertainty across major economies created headwinds for investors. Additionally, a global outage affecting services from airlines, banks, and financial institutions capped off a volatile week in the markets.
A sell-off in technology stocks, driven by escalating Sino-U.S. trade tensions, uncertainty surrounding U.S. President Joe Biden’s re-election prospects, disappointing economic data from China, and a lackluster outcome from China’s third plenum, contributed to a pessimistic global outlook. Tokyo’s recent yen interventions have further unsettled currency traders.
European shares fell, while Asian markets also dropped following an overnight selloff on Wall Street. U.S. stock futures indicated a weaker opening later in the day.
Major U.S. airlines grounded flights on Friday due to communications issues, while other carriers, media companies, banks, and telecom firms worldwide reported system outages disrupting their operations. The London Stock Exchange Group’s (LSEG.L) Workspace news and data platform also experienced an outage, affecting user access globally and causing significant disruptions in financial markets.
“Investors are already on edge with the tech rotation, and this global outage adds another layer of uncertainty,” said Ben Laidler, head of equity strategy at Bradesco BBI.
Heightened Uncertainty
European stocks fell 0.5%, while London stocks slipped 0.4%. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.7%, heading for its worst week in three months with nearly a 3% loss.
Technology stocks continued to struggle in Asia, with South Korea’s tech-heavy KOSPI index falling 1% and Taiwan stocks dropping 2.26%.
Michael Metcalfe, head of global macro strategy at State Street Global Markets, noted that politics, interest rate expectations, and corporate earnings were significantly impacting world markets. “The changing probability of a potential Trump presidency and its implications for markets, such as his view on the dollar or tech regulation, has clearly influenced market rotations this week,” he said, referring to Republican presidential candidate Donald Trump.
Investors are also closely monitoring the Federal Reserve’s response to improving inflation data and the U.S. earnings season, which is now in full swing. “Tech has been the key driver of earnings growth in recent years, so these will be crucial for overall risk sentiment,” Metcalfe added.
In China, investors were disappointed by the lack of detailed implementation steps for economic policy goals at the conclusion of its closely watched plenum on Thursday. Chinese officials acknowledged that the extensive list of economic goals contained “many complex contradictions,” indicating a challenging road ahead for policy implementation. Chinese blue-chips rose 0.5%, although the CSI300 Real Estate index slid about 2%, with the sluggish property sector continuing to weigh on China’s growth outlook.
Currency and Commodities
The euro dipped almost 0.2% to $1.0878 after the European Central Bank (ECB) kept rates on hold as expected but hinted at a possible rate cut in September, downgrading its economic outlook for the eurozone. “The policy statement offers little new information, maintaining a data-dependent approach,” said Nick Rees, FX market analyst at MonFX. “We still believe a September cut is likely.”
The dollar strengthened, moving away from a four-month low hit earlier in the week against a basket of currencies. Sterling eased 0.2% to $1.2918 following data showing British retail sales volume fell more than expected in June, while the dollar held steady around 157.29 yen.
In commodities, oil prices were relatively unchanged, with Brent crude futures around $85.2 per barrel and U.S. crude futures flat at about $82.78 per barrel. Gold eased 0.6%, retreating from a record high of $2,483.60 per ounce reached earlier this week on the prospect of lower global interest rates.
Source: Reuters