Europe Points Lower After US Tech Sell Off, NFP In Focus

Brutal tech selloff in US, spilled over into the broader market, dragging US indices sharply lower on Thursday. Asian markets saw the worst performance in two weeks overnight and European bourses are headed for a softer open.

Downtrend 2

A ferocious sell off in US tech stocks spilled over into the broader market, dragging US indices sharply lower on Thursday. Asian markets saw the worst performance in two weeks overnight and European bourses are headed for a softer open.

The Nasdaq has roared higher recently striking record high after record high as big tech such as Apple, Netflix, Amazon, Alphabet and Tesla have seen demand soar. These stocks have not only benefited from the acceleration of reliance on tech which covid has brought with it; they have also adopted an almost safe haven like status. Whilst these stocks are no strangers to talk of overvaluation, investors could be taking heed. The large-scale sell-off in tech stocks saw the Nasdaq plunge 5% and S&P drop -3.5%.

The brutal sell off in tech didn’t have the characteristics of a risk off event, given the performance of safe havens gold and USD, which both traded lower. So, this is looking more like a decent bout of profit taking. And who can blame them after such an impressive rally? 
Still the sheer size of the selloff has unnerved traders across Asia and is carrying over into Europe, with bourses looking to kick the session off lower ahead of the US non-farm payroll.

NFP to disappoint?
Expectations are for 1.4 million jobs to have been created in August, down from 1.76 million in July. The unemployment rate is also expected to slip into single digit falling to 9.8%, down from 10.2%. Average earnings growth is due to slow slightly to 4.5%, from 4.8% suggesting that more lower income earners are returning to the workforce.
The key lead indicators for the NFP report haven’t been encouraging. The employment component of the ISM manufacturing and non-manufacturing reports showed continued contraction, albeit at a slower pace. The closely correlated ADP report also fell short of expectation, suggesting a disappointing headline figure could be on the cards. However, in such unprecedented times anything is possible.

Europe’s rebound slowing
Meanwhile, the economic recovery in Europe could be showing signs of losing steam. The Spanish French and Italian service sector PMI’s revealed that activity contracted in August. Retail sales across the bloc also unexpectedly fell -1.3% month on month in July. Adding to the downbeat news German factory orders, which were expected to increase an impressive 5% month on, grew 2.8%, following from a 27% increase in June.

Dax chart

More from Indices

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.