Summary
Time for a recap
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Global stock markets are on track for their worst month in five years ,after another day of losses.
- In London, the FTSE 100 has lost nearly 1% to close at its weakest level since March. At one point it hit a 22-month low.
- The US stock markets is also in the red today. Technology stocks are leading the sell-off, after Amazon and Alphabet underwhelmed Wall Street with their results last night.
- Investors have not taken much cheer from the latest US GDP report, which showed a slightly faster acceleration in growth than expected.
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Consumer spending and government spending both boosted growth, but trade was a drag.
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Asia-Pacific markets also ended the week with another bout of volatility, and fears that contagion was spreading through the markets.
Here’s our latest news story on the markets, after a turbulent week:
Shares in New York are also climbing back from their earlier lows.
The Dow is now down just 140 points, or 0.6%, as a degree of calm returns to Wall Street.
Britain’s FTSE 250, an index of smaller companies, also lost almost 1% today:
#FTSE 250 closes at 18352.9, down 0.96% https://t.co/SleZfLHJJq
— London Stock Exchange (@LSEplc) October 26, 2018
#FTSE 250 biggest riser / faller: Just Group (+7.91%) / Avast (-7.18%) https://t.co/qU7adjVnWF
— London Stock Exchange (@LSEplc) October 26, 2018
As European traders count their losses and head to the pub, their counterparts on Wall Street have just endured a rough morning
Here’s the latest damage:
- Dow Jones industrial average: down 279 points or 1.1% at 24,715
- S&P 500: down 43 points or 1.6% at 2,661
- Nasdaq: down 153 points or 2.2% at 6,862
Neil Wilson of Markets.com says the FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) are doing the damage.
He writes:
Bloody FAANGs means Halloween comes early in nightmare month for equities.
“No respite for equity markets today as the weight of the FAANGs dragged on the wider market and raises a real risk that this selloff is about to turn into a full bear market. The S&P 500 has now dipped into correction territory in little over a month – a steep selloff.
Amazon and Alphabet earnings disappointed with less upbeat outlooks casting a cloud over tech stocks in particular. Bear in mind that it’s still the only real bright spot out there YTD and now it looks as though it’s starting to rollover.
If FAANGs are rolling over the weaker sector stocks are very vulnerable – Snap off 15% today after reporting another quarter of declining users and offered a pessimistic outlook. Snap’s investment thesis was always shaky and the truth is it was never going to deliver. Quality like Microsoft and Intel are holding relatively firm – they’ve not seen sky high valuations as some of the FAANGs so are seen a bit safer, while both have delivered on earnings.
FTSE 100 falls 64 points
Just in: Britain’s stock market has ended the day solidly in the red, at the end of a volatile week.
However, the losses aren’t quite as bad as earlier in the day, when stocks were languishing at a 22-month low.
The FTSE 100 closed 64 points lower, or -0.92%, at 6,939 points. Things looked worse an hour ago, before shares rallied into the closing auction in London.
Evraz was the biggest faller, down 6.3%, followed by online supermarket chain Ocada (-5%) and BT (-4.5%).
There are losses in Europe:
- Germany’s DAX: -0.94%
- French CAC: -1.3%
- Italian FTSE MIB: -0.7%
Fiona Cincotta of City Index says:
The large-scale volatility that we have seen across the week was certainly not packing away for the weekend early. The bloodbath continued with markets across the globe slamming lower as concerns over US corporate results overshadowed a robust US GDP figure.
Updated
As shares slide, investors are piling into the safety of government bonds.
Debt issued by Germany and America is always attractive on these occasions. So as prices leap, bond yields (the interest on the bond) are dropping.
Global Bonds rally in ugly Risk-Off move. US10y yields drop to 3.06%, German 10y Bund yields fall to 0.34%. pic.twitter.com/b0tIemfT2s
— Holger Zschaepitz (@Schuldensuehner) October 26, 2018
Newsflash: The FTSE 100 just hit its lowest level since December 2016.
It fell 152 points, or over 2%, to 6851, as markets end the week on a low.
Technology stocks had been a stellar performer earlier this year.
But now they’re sliding, and dragging the wider markets down, according to David Madden of CMC Markets:
The S&P 500 has fallen into correction territory as the decline in stocks intensifies. Amazon and Alphabet shares are in the red after both companies missed on revenue forecasts last night, and Amazon’s guidance was also below the consensus estimate.
US tech stocks set a series of record-highs throughout the summer, and they were the first to fall in the recent market rout. There is a sense that the tech sector is setting the pace for the rest of the world.
The sell-off is gathering pace, again.
The S&P 500 index, which covers a broader spread of the US economy than the Dow, is down 2.2%.
That puts the S&P 500 into correction territory, more than 10% off its peak in September.
FTSE 100 near to 22-month low
The good news for City investors is that this week of pain is almost over.
The bad news is that the FTSE 100 is wallowing close its lowest level since December 2016.
The blue-chip Footsie index is down 117 points, or almost 1.7%, at 6887.
Steel and mining company Evraz is the biggest faller, down 7.6% after mixed production numbers yesterday. WPP has shed another 4.6%, after Thursday’s rout following a profits warning.
Several economists are predicting that the US economy will slow in the quarters ahead, after six months of solid growth.
Capital Economics believes tighter monetary policy is already having an impact:
At 3.5% annualised, GDP growth remained unusually strong in the third quarter, thanks partly to this year’s fiscal stimulus, but there are signs that higher interest rates are beginning to have a bigger restraining effect.
Once the boost from fiscal stimulus fades next year, we expect economic growth to slow below its potential rate, forcing the Fed to the side-lines by mid-2019.
Kay Daniel Neufeld, managing economist of CEBR, believes the trade war with China will also hurt growth.
Q3 growth surprised on the upside, showing that the US economy continues to perform with considerable momentum in the second half of the year.
However, house-made problems including the deteriorating global trading conditions and the fast pace of monetary tightening spell trouble for the coming quarters.”
Ouch! The Dow Jones industrial average is now down 400 points, or 1.7%, as the market turmoil continues.
Another tech firm, Cisco, is the biggest faller on the Dow (down 2.1%), followed by Home Depot (-1.9%) and American Express (-1.7%).
Technology stocks are sliding in New York, particularly those which have disappointed Wall Street.
Hard drive maker Western Digital has tumbled by 17%, after reporting a 3% drop in revenues for the last quarter. Profits shrank by 24%.
Amazon has slumped by 7.5% after giving disappointing guidance for the holiday period last night.
Google parent company Alphabet has shed 3%.
This is all weighing on the Nasdaq, of course, which is down over 2%.
Wall Street opens sharply lower
The bell has rung and stronger-than-expected US growth in Q3 has failed to cheer investors.
Opening scores:
- Dow Jones: -242 points or -1% at 24,742
- S&P 500: -39 points or -1.5% at 2,666
- Nasdaq: -186 points or -2.5% at 7,132
Three minutes until the opening bell on Wall Street...
Balraj Sroya, trader at currency firm Foenix Partners, says the US growth figures are key to both Trump and the Federal Reserve:
Trump’s mantra of ‘Making America Great Again’ is echoing across the US economy as third quarter GDP growth outpaced market consensus with a print of 3.5%. Consumer spending and businesses increasing their inventories aided the strongest back to back quarters for growth in over two years.
Today’s print was crucial for Trump and the GOP ahead of the Midterm elections as GDP seems to be aligning with the President’s target for 2018, however it could spark the Fed to consider a more aggressive monetary policy.
The detail behind the headline GDP growth figure, published by the US Commerce Department, shows that consumer spending boosted the economy in the third quarter, but net trade was a drag as exports fell but imports rose.
The Department said:
The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures, private inventory investment, state and local government spending, federal government spending, and nonresidential fixed investment that were partly offset by negative contributions from exports and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the third quarter reflected a downturn in exports and a deceleration in nonresidential fixed investment. Imports increased in the third quarter after decreasing in the second. These movements were partly offset by an upturn in private inventory investment.
Nancy Curtin, chief investment officer at Close Brothers Asset Management, said Donald Trump is likely to jump on the US growth figures:
We can expect President Trump to wax lyrical about these results in the run up to the congressional midterm elections, adding evidence to his promise on expanding the economy.
However, growth has already moderated and will continue to do so in 2019 as the tax cut boost dissipates and inflation tightens its grip as a result of Trump’s tit for tat with China.
(No Trump tweet about Q3 as yet...)
US futures pare losses after GDP
Pre-trading on Wall Street has picked up after the news that US growth slowed less than expected in the third quarter, to 3.5%.
US futures are still down before the opening bell, but less so:
- Dow Jones: -177 points or -0.7%
- S&P 500: -24 points or -0.9%
- Nasdaq: -124 points or -1.8%
US economy grows 3.5% in Q3
Breaking: The US economy grew by 3.5% in the third quarter, faster than the 3.3% predicted by economists.
It was a slowdown compared with the second quarter, when the economy grew by 4.2% on an annual basis.
#UnitedStates #GDP Growth Rate QoQ Adv at 3.5% https://t.co/sUMfkn31hz pic.twitter.com/x3gJW3zmjQ
— Trading Economics (@tEconomics) October 26, 2018
Updated
Economists at Investec have taken a step back from this week’s market mayhem to look at prospects in the months ahead for the global economy.
In a month full of uncertainties, a ‘glass half full’ approach might be to say that there has been some respite in global trade tensions. However the pause looks to be because the Chinese and US authorities are eyeing more constructive talks after the US mid-terms.
Even with this respite, risk assets are currently under pressure amid continuing concerns that the Fed may embark on a more aggressive tightening path, concerns over earnings and equity valuations and as other global political concerns have arisen. Furthermore some signs have emerged that suggest recent protectionist actions have spilt over into confidence and growth.
But as yet we do not judge risks related to the above to be substantial enough to shift our world GDP forecasts, particularly given supportive fiscal policy in the US and China. We continue to look for 3.8% world growth this year and 3.7% next. Risks though lie to the downside for 2019.
The pound is down 0.3% against the dollar at a two-month low of $1.2784.
It’s partly a story of a stronger dollar, which is up against a basket of currencies ahead of the US GDP number at 1.30pm UK time.
Patisserie Valerie accepts resignation of Chris Marsh
Another day, another statement from Patisserie Valerie, the troubled cafe and bakery chain which earlier this month discovered a black hole in its accounts and a £1m unpaid tax bill that threatened the firm’s collapse.
The latest news is that Chris Marsh, the firm’s finance director who was arrested on suspicion of fraud and subsequently bailed, has resigned.
Pat Val’s parent company, Patisserie Holdings, issued a brief statement:
Patisserie Holdings plc announces that following the suspension of Chris Marsh on 9 October 2018, the company has now accepted his resignation as the company’s finance director with immediate effect, while reserving its position in respect of any potential claims it may have against him.
The latest announcement isn’t quite surprising as the company’s other ones over the past month.
not a great surprise to see Patisserie's Chris Marsh resign now is it
— Neil Wilson (@marketsneil) October 26, 2018
Global markets head for longest losing streak in 5 years
Thursdays rebound on Wall Street - with the Dow Jones surging 401 points - is nowhere to be seen today, with global markets on course for their longest losing streak in more than five years.
European markets are sharply lower and US futures suggest the Dow could lose another 300-or-so points when the bell goes on Wall Street.
Here’s a look at US futures:
- Dow Jones: -271 points or -1.1%
- S&P 500: -38 points or -1.4%
- Nasdaq: -174 points or -2.5%
The MSCI all-country index, which tracks shares in 47 countries, was earlier down 0.3% and on track for a fifth week of losses - the longest losing streak since May 2013.
Updated
RBS weighs on FTSE
Royal Bank of Scotland is weighing on the FTSE 100 this morning, with shares down nearly 5%.
The bailed-out bank published third-quarter results this morning, and the detail has underwhelmed investors.
Attributable profit - the figure which determines the dividend - was up 14% in the three months to the end of September, at £448m, but it was below expectations of £507m.
Operating costs also increased as the bank set aside another £200m for payment protection insurance claims.
In better news, pre-tax profit rose 10% in the third quarter, to £961m. But that has not been enough for traders, and RBS is among the top FTSE fallers:
Russ Mould, investment director at AJ Bell, says that hopes appear to have been dashed for a positive end to the week for the FTSE .
Any suggestion UK stocks might end the week on a more positive note has been swatted aside after the third quarter sales performance of Amazon and Google’s parent company Alphabet disappointed after the market close in the US.
Given the technology sector helped lead US indices to fresh highs in 2018 and is so dominant, its performance in the current earning season was always likely to be pivotal to investor sentiment.
Figures expected to show US economy grew 3.3% in Q3
As if traders didn’t have enough to contend with, later today we’ll get US GDP data for the third quarter.
Figures are expected to show the world’s largest economy grew by 3.3% in the third quarter, on an annual basis.
It would be a slowdown from 4.2% in the second quarter. The figures will be published at 1.30pm, UK time.
Connor Campbell, analyst at Spread Ex, says the number could weigh on investor moods:
Given that the slightest thing sets the markets off at the moment, it is going to be interesting to see how they deal with this afternoon’s first look at the US third quarter GDP figure.
Analysts are expecting a slowdown from 4.2% in Q2 to 3.3% in Q3, a decline that may only cause further problems at the end of a tiring and tricky week.
Let’s take a closer look at the markets in Europe, where losses are accelerating this morning:
As well as the disappointing results (on some measures) from Amazon and Alphabet, investors are also concerned by a number of other risks. To name a few - the US/China trade war, rising US interest rates, instability in emerging markets, and Brexit.
Here is our story on how the market volatility has gripped Asian and Australian markets overnight:
European markets open lower
Opening bells have rung across Europe and the mood is gloomy:
- FTSE 100: -0.8%
- Germany’s DAX: -1.1%
- France’s CAC: -1%
- Italy’s FTSE MIB: -0.5%
- Spain’s IBEX: -0.6%
- Europe’s STOXX 600: -0.6%
David Madden, analyst at CMC Markets, explains why Amazon and Alphabet disappointed investors:
We heard from tech giants Amazon and Alphabet after the closing bell last night. Amazon topped the earnings per share forecast, but missed on revenue and the guidance.
Google’s parent, Alphabet, exceeded estimates on EPS, but undershot the revenue forecast. Both stocks dropped heavily in the post-market session, and in turn sparked selling across major US indices.
Updated
US tech misses dampen market recovery
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We’re almost at the end of what has been a hugely volatile week for global stock markets.
Wall Street bounced back on Thursday, with the Dow Jones surging 401 points, a gain of 1.6%, to close at 24,984. It followed sharp falls on Wednesday, and the turnaround in sentiment was largely down to technology stocks - after positive Twitter and Microsoft results - industrials companies and banks.
But sentiment soured when US tech giants Amazon and Alphabet reported disappointing revenues after the closing bell on Wall Street. It was enough to send US futures lower, which in turn triggered a sell-off in Asia where shares hit 20-month lows.
Markets across Europe are expected to open sharply lower this morning as the gloomy sentiment spreads across the Atlantic:
European Opening Calls:#FTSE 6935 -0.99%#DAX 11177 -1.16%#CAC 4968 -1.29%#MIB 18605 -1.12%#IBEX 8671 -1.30%
— IGSquawk (@IGSquawk) October 26, 2018
We will be following the markets and all the latest business news as this volatile week for global markets draws to a close.
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