Stock Market Global Sell-Off is Rattling Investors

Weaker US earnings stoke fears of economic slowdown as Nasdaq sees worst fall in 7 years.

Stock markets in Asia tumbled on Thursday following a dramatic sell-off overnight on Wall Street, putting a number of Asian indices on track for their worst month since the global financial crisis. European bourses were expected to follow, with futures trade pointing to declines of 0.9 per cent for the Xetra Dax 30 in Frankfurt and London’s FTSE 100, with attention focused on a eurozone interest rate decision due later on Thursday. A slew of weaker-than-expected US earnings results this week — against a backdrop of heightened geopolitical uncertainty — has rattled investors, exacerbating the sell-off in global equities that has gathered pace in October and stoked fears of a wider economic slowdown.

A Wall Street sell-off accelerated sharply into the close on Wednesday, with the S&P 500 and Dow Jones Industrial Average ending in negative territory for the year. Investors in the US dumped shares of technology companies, sending the Nasdaq down 4.4 per cent – its biggest one-day drop since August 2011. “It’s super-ugly, and who knows when it will be over,” said Adam Sender, chief investment officer of Sender Company and Partners, an investment group. “I’m very defensively positioned.”

The S&P 500 fell for the sixth straight day, finishing 3.1 per cent lower at 2,656.10 points — and down 0.65 per cent year-to-date. In Asia, China’s CSI 300 index of companies listed on mainland exchanges dropped as much as 2.8 per cent on Thursday while Tokyo’s Nikkei 225 index was down 3.7 per cent. “There are a multitude of reasons why markets came down in early October, but everyone said it would be OK, because US corporate earnings would prop them up,” said Kerry Craig, a global market strategist at JPMorgan Asset Management. “But they have not been as strong as expected — cracks are appearing in earnings.”

Against a backdrop of rising interest rates and growing trade tensions, a feeling that the best days of the economic cycle were in the past was taking hold — fed by the results of bellwether industrial companies such as Caterpillar and 3M this week. “That is definitely the fear — that we are at peak earnings,” said Max Gokhman, head of asset allocation for Pacific Life Fund Advisors.