World shares slightly down as tech recovery in doubt

Milan/Tokyo — World shares struggled to stabilise on Tuesday as doubts about a recovery in tech stocks lingered after last week’s rout, while the dollar steadied as investors pondered whether policy signals from the European Central Bank (ECB) this week could weaken the euro.

Fresh tensions between Washington and Beijing after US President Donald Trump again raised the idea of decoupling the US and Chinese economies appeared to have little impact.

“I think the market will shrug this off as electioneering but may find the lining up of technology stock sellers harder to process as the US market returns from the holiday yesterday,” said Chris Bailey, European strategist at Raymond James.

World shares fell 0.1% by 8.35am GMT following gains in Asia overnight and a negative start in Europe, where fresh pressure on tech stocks dragged the Stoxx 600 benchmark down 0.9% following strong gains on Monday.

After US markets were shut on Monday for Labour Day, S&P 500 futures fell 0.1%, reversing gains made in Asian hours, while futures in tech-heavy Nasdaq fell 1.3% after having lost more than 6% late last week.

While many market players were unable to pinpoint a single trigger for the Nasdaq’s sudden plunge, valuations have been stretched given its sharp 75% gain from a bottom hit in March.

MSCI’s broadest index of Asia-Pacific shares excluding Japan rose 0.4% and Japan’s Nikkei ended up 0.8%. China’s blue-chip index and Hong Kong’s Hang Seng, meanwhile, gained 0.5% and 0.2%, respectively, both erasing early losses made after Trump’s remarks.

The newly launched Hang Seng tech index fell 1.4%.

Trump’s remarks followed the possible US blacklisting of China’s largest chip maker, SMIC, which has hit many Chinese tech firms listed onshore and offshore.

Dollars steady, pound hit

In foreign exchange markets, the dollar was slightly stronger against a basket of currencies at 93.115 and firmed marginally against the euro at $1.1816 with the main focus on this week’s ECB policy meeting.

Most analysts do not expect a change in the ECB’s policy stance but are looking at its inflation forecasts and whether it seems concerned by the euro’s strength.

“Range-bound trading will likely remain predominant until Thursday when the ECB meets,” UniCredit analysts said in a note.

Sterling fell to a two-week low against the dollar after the EU told Britain on Monday there would be no trade deal if London tries to override the Brexit divorce deal it signed in January. The pound slipped more 0.3% at $1.3135 while against the euro it touched 0.90p, also a two-week low.

Gold prices softened on Tuesday, though rising doubts over the economic recovery from the Covid-19 slump limited losses. Spot gold was little changed at $1,9283.87 an ounce.

Oil fell below $42 a barrel, its fifth session of decline, pressured by concerns that a recovery in demand could weaken as coronavirus infections flare up around the world. US crude futures fell 3.3% to $38.46 a barrel.

The 10-year US treasury yield stood at 0.709%, off a five-month low of 0.504% touched in August.

Reuters