Fragile sentiment as global market sell-off eases

By By John-Paul Ford Rojas & James Sillars, business reporters

There are signs the global stock market rout is easing after Asian and European equities failed to follow US shares sharply lower.

New York’s Dow Jones Industrial Average had closed more than 500 points, or 2%, down during Thursday’s session following a 3% fall the previous day.

There had earlier been a further dip for the FTSE 100 in Britain, which saw £36bn wiped off the value of its constituent companies – taking the total loss over two days to £60bn.

Traders look at screens during a stock market fall
Image:European markets have joined Asian counterparts in a tentative rally following the steep falls of recent days

But Asia started Friday on a largely positive footing, with analysts pointing to some cautious buying opportunities being taken.

The Nikkei in Japan was almost 0.5% higher by the close while the Hang Seng in Hong Kong was 1.7% up.

The main markets in Europe were also in positive territory but also with subdued sentiment, with the FTSE 0.4% up in early deals, while Dow Jones futures pointed to a 1% rise on opening later in the day.

Market experts have pointed to a cocktail of worries for stock market investors that have been building in recent weeks.

:: The global stock market sell-off explained

Chief among them is the rising path of US interest rates, which it is feared could put the brakes on the world’s biggest economy by adding to borrowing costs for consumers and businesses.

Adding to the anxiety is the uncertainty caused by US president Donald Trump’s trade war with China as well as the sharp upturn in yields on bonds – parcels of US government debt – which is diverting some investor attention from stocks.

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan in New York

0:35

Video:What is behind the market dips?

The ongoing market turmoil prompted Mr Trump to lash out at the US Federal Reserve – accusing the central bank of being “out of control” after a series of interest rate hikes.

But the Fed – led by Mr Trump’s hand-picked chairman Jerome Powell – won backing from International Monetary Fund chief Christine Lagarde, who said that raising rates in economies like America’s was “clearly a necessary development”.

Mr Trump conceded to White House reporters that he was “not going to fire” Mr Powell.

Rebecca O’Keeffe, head of investment at Interactive Investor, said markets were likely to take direction later on Friday from US bank earnings.

“The verdict is still out about current valuations and while some investors are viewing this as a buying opportunity, many others are maintaining a more cautious stance and waiting for clear signs that this was a temporary pull-back rather than the start of a more pronounced correction.

“One major plus point for investors who are viewing the market as oversold and a good time to buy is the VIX index.

“Previous sell-offs have fizzled out when the major volatility index reached the high twenties, and yesterday’s high saw the VIX reach 28.84, before falling back.

“Over the past few years, this level of volatility has typically proved to be a market turning point, the one exception being early-2016.”