04 September 2020

European Indices Hit by Sharp Decline in Tech Stocks


News shaping
the markets today


What’s happening: European stocks closed lower on Thursday, failing to hold gains recorded earlier in the session.

What happened: Better-than-expected economic releases by various counties had lifted investor confidence earlier in the session yesterday, with hopes of the global economy soon returning to pre-pandemic levels.

However, a rough session on Wall Street triggered a downturn in European stocks, sending them sharply lower towards the end of the session.

Why it matters: Equity markets around the world have recently help up with hopes of additional US stimulus and progress in the covid-19 vaccine front. Seventy-six countries have committed to join the WHO’s (World Health Organization) “COVAX” access program, which aims to ensure a fair distribution of coronavirus vaccines, once launched.

Investors were also encouraged by upbeat Eurozone economic reports released on Thursday, lending momentum to stocks earlier in the session. The Eurozone services PMI remained above 50, which indicates expansion, while the final Markit composite PMI also came in above that level, at 51.9, beating market expectations of 51.6.

UK services PMI surged in August, holding well above the 50 mark. Services PMI for Germany was revised higher to 52.5 for August, from a preliminary estimate of 50.8.

Economic data from China also showed encouraging signs, with the country’s services sector expanding again last month.

However, the rally in equities was short-lived, as Wall Street technology stocks headed sharply lower. Tech stocks, which have powered the US stock market amid the covid-19 crisis, made a sharp U-turn on Thursday. The MAGA stocks were among the worst hit, with Microsoft, Amazon, and Alphabet down more than 4% and Apple plummeting 8%. The major stocks that performed worse than MAGA were Tesla and Zoom Video Communications.

The pan-European Stoxx 600 index closed lower by 1.4%, with most sectors ending in negative territory. Tech stocks were among the biggest losers, falling close to 4%.

The French CAC 40 slipped just 0.4% on Thursday, as the country’s government announced details of its €100 billion stimulus program.

Lack of progress in Brexit talks also continued to disappoint markets. The EU's negotiator said that Britain must address the region’s issues including fair competition and fisheries for sealing a deal by the end of October. London’s FTSE 100 closed lower by 1.5%

Despite the broader decline, the so-far troubled travel stocks made some progress. Shares of EasyJet and Lufthansa added more than 4%, while IAG’s stock climbed 6%. Shares of cruise operator Carnival also surged more than 6% on Thursday.

What to watch: Investors awaiting data on Eurozone’s construction PMI. The IHS Markit Eurozone construction PMI had climbed to 48.9 in July, versus a reading of 48.3 in June. Markets will also keep an eye on the US jobs report, which is scheduled for release later today.

Covid-19 remains one of the major concerns for investors, with total cases surging to 26.2 million globally.

The Markets Today


Gold will be in focus today, after the yellow metal settled at its lowest level in a week.

Context: Gold futures settled lower on Thursday, with traders selling the precious metal to cover losses in other assets due to a sharp selloff in US equities.

Details: US stock indices closed sharply lower on Thursday, after rallying strongly earlier in the week. Heavy selling in equities can sometimes drive traders to sell other assets, including gold, in a bid to cover their losses.

Rising hopes for a coronavirus vaccine have also weighed on the yellow metal’s price with improved investor risk appetite.

Gold struggled for some direction earlier in the session, following a decline in weekly jobless claims, but found some support after the US reported a widening of its trade deficit.

After dropping 1.7% on Wednesday, December gold declined around 0.4% to settle at $1,937.80 an ounce in the previous session, recording its lowest close since August 27.

December silver also fell 1.9% to close at $26.875 an ounce, after dropping 4.4% in the earlier session.

Among other metals, December copper declined 1.5% to $2.975 a pound, while October platinum slipped 1.6% to settle at $889.60 an ounce on Thursday.

What to watch: All eyes will be on the US NFP report, which is scheduled to be released later in the day. A strong jobs report from the country is could exert further pressure on gold prices.

Gold futures made a slight rebound this morning, trading higher by 0.3% at $1,943 an ounce during the Asian session.

Other Markets: US indices trading closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 2.78%, 3.51% and 4.96%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


Germany’s new manufacturing orders and construction PMI, France’s current account, government budget value and construction PMI, Italy’s construction PMI, UK’s new car registrations and construction PMI, Russia’s inflation rate, Mexico's car output, auto exports and foreign exchange reserves, Canada’s employment change, unemployment rate and Ivey PMI as well as the US nonfarm payrolls, unemployment rate and Baker Hughes crude oil rigs.


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