European shares hit their lowest point in more than 21 months following an anxious slide on Wall Street, as jitters over rising US Treasury yields, trade tensions and signs of slowing global growth prompted a sell-off of risky assets. All sectors in Europe fell, although tech stocks recovered some losses.
US President Donald Trump blamed an “out of control” US Federal Reserve for the downturn.
The recent bond market turbulence – which pushed the benchmark US Treasury yield to a seven-year high of 3.26 per cent earlier this week - has unnerved investors and bled into equities, sending the FTSE All-World down for a sixth day running on Thursday and erasing all of 2018’s gains. The US stock market is facing its longest losing streak of Mr Trump’s presidency.
Mr Trump has spent much of the past 24 hours criticising Fed tightening, piling on in an Oval Office meeting where he said he was “disappointed” in the central bank chairman, Jay Powell - but said he was not thinking of removing him.
“I’d like our Fed not to be so aggressive because I think they’re making a big mistake,” he said. That followed similar comments on Wednesday, when he said “the Fed has gone crazy”.
The big US technology companies that have been the engine behind a multi-year bull market posted heavy losses overnight, but clawed back some losses in early trading on Thursday.
Amazon was the worst-performing member of the "FAANG" group (Facebook Amazon, Apple, Netflix and Google-parent Alphabet) as of about 1pm in New York, trending about 2.1 per cent lower.
Wall Street’s three main indexes – the S&P 500, the Nasdaq and the Dow Jones Industrial Average – were all in the red, though not to the same degree as they had been in the previous session.
Nervousness
As European markets closed, there remained some nervousness among investors that the US would be hit by another severe sell-off later in the evening.
The euro zone’s Stoxx index extended losses during the day to close down 1.7 per cent, while the pan-European Stoxx 600 benchmark was down 2 per cent to its lowest level since December 2016. It has lost 4.5 per cent so far this week.
Britain’s FTSE 100 fell 1.9 per cent, the French Cac 40 sank 1.9 per cent and Germany’s Dax finished 1.5 per cent lower.
The Dublin market was also hit by the fragile sentiment, with the Iseq enduring weakness across the board. The index ended 2.2 per cent lower, compounding Wednesday’s 2.7 per cent decline.
The main local news was the overnight announcement that food group Glanbia has agreed to buy diet brand SlimFast as part of a $350 million (€303 million) deal. The stock closed 3.3 per cent lower at €13.84.
Bank of Ireland also fell 3.3 per cent to €6.30, while building materials group CRH dropped 3.2 per cent to €26.28 and Cairn Homes ended 3.7 per cent lower at €1.40. Dalata Hotel Group sank 5.5 per cent, finishing at €5.69, adding to its recent decline.
Ryanair was one of the few stocks to finish in positive territory, nudging up 0.2 per cent to €11.44.
Across Europe, defensive sectors such as healthcare, telecoms and real estate outperformed the broader market, as investors sought to limit the damage by turning to stocks that are attractively valued and less exposed to a slowdown in global growth.
German pharmaceutical group Bayer was an outlier, rising 3.1 per cent after its Monsanto unit received a tentative ruling for a new trial on $250 million in punitive damages in a US weed-killer case.
Oil
UK shares closed at their lowest level since April. Books, newspaper and stationery retailer WH Smith posted the worst performance of the pan-European Stoxx 600 index, slumping 11.5 per cent after it unveiled plans to restructure its high street business to face lower consumer spending and lingering economic uncertainties.
Recruiting firm Hays was second, sinking 11 per cent, after reporting a slower quarterly fee growth rate, hurt by a relatively stronger pound against other foreign currencies.
Oil majors also contributed to drag the index down as oil fell to two-week lows with prices also hit by the storm on Wall Street and an industry report showing US crude inventories rose more than expected. Oil stocks closed down 3.1 per cent, with BP losing 2.6 per cent and Royal Dutch Shell ending 3 per cent lower.
A surge in gold prices triggered by risk-wary investors searching for safe havens lifted miners Fresnillo and RandGold up 9 per cent and 8.7 per cent respectively.
European banks fell 2.4 per cent, financial services tumbled 2.9 per cent and insurers lost 3.1 per cent. – Additional reporting: Reuters/FT
