Tech stock selloff spreads to Asia, Europe as pound swings

TOKYO (BLOOMBERG) - A selloff in US technology stocks spread, dragging down shares from South Korea to the Netherlands. The British pound fluctuated as investors assessed the impact from the UK's political turmoil.

Samsung Electronics, ASML Holding and Tencent Holdings led declines among technology companies in Europe and Asia. US stock futures fell after the Nasdaq 100 sank 2.4 per cent on Friday. Sterling swung after the biggest drop in eight months as Prime Minister Theresa May struggled to keep power in the wake of Thursday's election. Oil fell, reversing earlier gains.

The rout in US tech stocks began when Robert Boroujerdi, global chief investment officer at Goldman Sachs, warned that low volatility in Facebook, Amazon.com, Apple, Microsoft and Google parent Alphabet may be blinding investors to risks such as cyclicality and regulation. The declines prompted a re-evaluation among some bulls after the stocks' market value increased by US$500 billion since December and helped send global equities to record levels.

"There's a chance US internet technology stocks that have propelled a global stock rally will now serve as a buzz kill," said Mitsuo Shimizu, deputy general manager at Japan Asia Securities in Tokyo.

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Investors are watching for repercussions from last week's elections. Some of May's most senior ministers are working to moderate her plans for a hard Brexit. Brexit Secretary David Davis defended May, saying in an ITV interview it's "the height of self-indulgence" to talk of dislodging her as prime minister. Traders are also weighing France's parliamentary elections, where the first round showed President Emmanuel Macron's party headed for a majority.

The drama in Washington continues this week after fired FBI director James Comey's testimony on Thursday. Attorney General Jeff Sessions offered to speak to the Senate Intelligence Committee to answer questions about alleged Russian meddling in the 2016 presidential election. On top of that, traders face central bank decisions, with the Fed expected to raise interest rates at the conclusion of their two-day meeting.

Here's what investors will be facing this week: Theresa May will address the 1922 Committee of rank-and-file Tory lawmakers on Monday, in a meeting that will test her chances of staying in office.

Fed policy makers are forecast to raise their benchmark interest rate for the second time this year on Wednesday. Central banks in Japan and Britain are also scheduled to weigh in with policy decisions this week.

The Stoxx Europe 600 Index slid 0.5 per cent as of 8:18am in London, with ASML Holding dropping 3.4 per cent.

Japan's Topix was little changed, while the Nikkei 225 Stock Average slid 0.5 per cent, weighed down by declines in Fast Retailing and SoftBank Group. South Korea's Kospi lost 1 per cent, with Samsung slumping 1.6 per cent. Hong Kong's Hang Seng Index declined 1.1 per cent, as Tencent Holdings fell 2.2 per cent.

The Shanghai Composite Index retreated 0.6 per cent, after a four-day rally.

Markets in Australia, Malaysia and the Philippines are closed for holidays.

S&P 500 Index futures slipped 0.1 per cent. The benchmark gauge fell 0.1 per cent on Friday, while the tech-heavy Nasdaq Composite Index dropped 1.8 per cent. Apple sank 3.9 per cent, while Microsoft, Amazon, Facebook and Alphabet all lost more than 2 per cent.

The pound was flat at US$1.2741, after falling as much as 0.3 per cent and gaining as much as 0.2 per cent earlier in the day. The currency lost 1.6 per cent on Friday.  The euro rose 0.1 per cent to US$1.1208.

The Bloomberg Dollar Spot Index was little changed after gaining 0.5 per cent over the previous three sessions.

The South Korean won dropped 0.4 per cent. The yen was steady at 110.28 per dollar, after three days of declines.

The yield on 10-year Treasuries headed higher for a fourth day, advancing two basis points to 2.22 per cent.

West Texas crude dropped 0.2 per cent to US$45.76 a barrel, reversing an earlier gain that came after Saudi Arabia and Russia sought to reassure investors that coordinated production cuts by OPEC and its partners are draining a global glut. Oil slumped almost 4 per cent last week amid an unexpected increase in US stockpiles.

Gold was little changed at US$1,266.49 an ounce, after three days of declines.