Hammering for tech stocks sets tone for weak session
A big slide for New York technology stocks, with Amazon and Netflix 7% lower, means European markets face another difficult session.
The Nasdaq lost 5% and the Dow Jones Industrial Average closed 3% lower in a turnaround of fortunes from big gains the previous session.
Sentiment had initially been stronger after Federal Reserve chairman Jerome Powell’s comments about not wanting to raise interest rates by more than half a percentage point in the battle to control inflation.
Despite his reassurances, 10-year US bond yields later returned above 3% as Wall Street revisited the possibility of a 0.75% rise at the Fed’s next meeting in June.
Stock market sentiment further weakened and the pound fell sharply after Bank of England governor Andrew Bailey warned that the UK economy will contract in 2023.
Michael Hewson, chief market analyst at CMC Markets, said: “Whereas Powell adopted a sombre but optimistic tone that the Fed could achieve a soft landing, Bailey was much gloomier about the outlook as the Bank downgraded the outlook for the UK economy.
“This gloomy stagflation/recessionary outlook may well have prompted investors to reassess the initial optimism of central bankers, on either side of the Atlantic to engineer a soft landing for the wider global economy, at a time when growth is already slowing, and prices are still climbing.”
Hewson sees the FTSE 100 index opening three points lower at 7500, but with sentiment generally weakening after the top flight lost an initial 1.5% gain in yesterday’s session.