World Markets

GLOBAL MARKETS-FANGS and BATS sell-off spooks world stocks

Credit: REUTERS/STAFF

Global stock markets suffered a second day of sharp losses on Tuesday as a combination of inflation worries, lofty valuations and an anti-monopoly drive in China sent the world's mightiest tech giants tumbling.

By Marc Jones

LONDON, May 11 (Reuters) - Global stock markets suffered a second day of sharp losses on Tuesday as a combination of inflation worries, lofty valuations and an anti-monopoly drive in China sent the world's mightiest tech giants tumbling.

Europe had touched a record high on Monday but more than 2% falls on London's FTSE .FTSE, Frankfurt's DAX .GDAXI and the CAC 40 in Paris .FCHE turned it into a sea of red ahead of what looked like being another down day on Wall Street. .EU

Asia had been brutal overnight too with 3% tumbles on Japan's Nikkei .N225 and Hong Kong's Hang Seng .HSI giving Asia's main regional equity gauges .MIAPJ0000PUS their worst day in nearly two months.

Talk of tighter regulation from Beijing had sent Chinese tech heavyweights Baidu 9888.HK, Alibaba 9988.HK Tencent 0700.HK, collectively dubbed the BATs, down more than 3%. Food delivery major Meituan 3690.HK had tumbled as much as 9.8% to wipe nearly $30 billion off its value for the week.

It all followed Monday's 3.6% slump in the FANG+ index of U.S. megacap tech firms .NYFANG which had seen electric car pioneer Tesla TSLA.O skid 6.4% and Apple .APPL.O and Google GOOGL.O both fall roughly 2.5%. .N

"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."

The old market adage of sell in May might well be coming true for those high-flying firms. Amazon AMZN.O has lost close to $140 billion so far this month, Tesla TSLA.O over $77 billion and the whole FANG gang combined more that $440 billion.

INFLATION ANGST

A worry is that interest rates that have been slashed to help nurse the world economy through the coronavirus pandemic will start to rise again and shatter the assumptions that have been used to keep buying eye-wateringly priced stocks.

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 global inflation will be transitory as economies emerge from COVID lockdowns.

U.S. breakeven rates, which factor in inflation, have scaled multi-year peaks. Most euro zone bond yields edged back up on Tuesday while a market gauge of long-term inflation expectations EUIL5YF5Y=R 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 U.S. inflation will come when the Labor 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 U.S. currency near a 2-1/2-month low. /FRX

A consolidation in commodity markets after their surge on Monday kept the Australian dollar AUD=D3 just below a two-month high at $0.7827. The Canadian dollar CAD=D3 stabilised near a four-year high, while the New Zealand dollar NZD=D3 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 U.S. fuel pipeline could restart swiftly.

U.S. crude CLc1 dipped 0.66% to $64.49 a barrel. Brent crude LCOc1 fell to $67.84 per barrel.

Metal markets saw copper prices start to nudge higher again. They were last at $10,530 a tonne having hit a record high $10,747.50 the previous session. Iron ore SZZFc1 had settled too after surging 7% on Monday. MET/L

Falling FAANGshttps://tmsnrt.rs/3eDpkcU

China's BAT tech stocks hit by anti-monopoly drivehttps://tmsnrt.rs/3vV7Kqq

(Additional reporting by Tom Westbrook in Singapore, Editing by Gabriela Baczynska, William Maclean)

((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter @marcjonesrtrs))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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