Tech giants continue tumbling, forcing global markets lower

London — Global stock markets were set for a second day of sharp losses on Tuesday as the combination of inflation worries and an antimonopoly drive in China sent the world’s mightiest tech giants tumbling.

Europe had touched a record high on Monday but its restart was a sea of red as London’s FTSE, Frankfurt’s DAX and the CAC 40 in Paris all dropped roughly 2%.

Asia’s main regional equity gauges had suffered their biggest slide in nearly two months overnight, with Japan’s Nikkei and Hong Kong’s Hang Seng both closing down 3%.

With talk of tighter regulation from Beijing, Chinese tech heavyweights Baidu, Alibaba and Tencent, collectively dubbed the BATs, all dropped more than 3%. Food delivery major Meituan tumbled as much as 9.8% too, leaving its value $30bn lower in a week.

It had followed a 3.6% slump in the US FANG+ index of megacap tech firms on Monday. Electric car pioneer Tesla had skidded 6.4% and Google fell 2.5%.

“The underlying driver is that there is still a rotation out of duration (higher interest rate) sensitive parts of the market and this is why tech stocks are coming under pressure now,” said Mizuho’s Head of multi-asset strategy Peter Chatwell.

“Given the rise in the earnings power of these firms different governments will also seek to raise more tax revenue from them in the coming years.”

Inflation angst

The cost of raw materials from copper to wood to wheat have been soaring over the last month, testing the views of top central bankers that rises in inflation will be transitory as economies emerge from Covid-19 lockdowns.

US break even rates, which factor in inflation, have scaled multiyear peaks. Most eurozone bond yields edged back up on Tuesday while a market gauge of long-term inflation expectations was nearing its highest in over two years.

A host of Federal Reserve and European Central bank speakers this week will be closely watched by markets to assess how authorities are likely to respond.

A test case on US inflation will come when the labour department releases consumer price index report on Wednesday.

“Inflation’s shadow looms large and we do think that there is a limit to the Fed’s tolerance of inflation,” DBS Bank said in a note.

In currency markets speculation that growing price pressure would erode the dollar’s value kept the US currency near a two-and-a-half-month low.

A consolidation in commodity markets after their surge on Monday kept the Australian dollar just below a two-month high at $0.7827. The Canadian dollar stabilised near a four-year high, while the New Zealand dollar perched comfortably at February highs.

Oil prices gave up earlier gains as concerns that rising Covid-19 cases in Asia will dampen demand outweighed expectations that a major US fuel pipeline could restart swiftly.

US crude dipped 0.66% to $64.49 a barrel. Brent crude fell to $67.84 per barrel.

Metal markets saw copper prices start to nudge higher again. They were last at $10,470 a tonne having hit a record high $10,747.50 the previous session. Iron ore had settled too after surging 7% on Monday.

Reuters