European stocks pushed higher on Monday following rockier trading in the Asia session and a US sell-off last week.
The region’s benchmark Stoxx Europe 600 was up 0.9 per cent in morning trading on Monday, while London’s FTSE 100 added 1.2 per cent.
That formed a sharp contrast to a tech-led US decline at the end of last week. The tech-focused Nasdaq Composite closed 1.3 per cent lower on Friday at the end of its worst week since March, while the broader S&P 500 fell 0.8 per cent.
UBS Global Wealth Management said that the stumble in US markets “raises the question about whether the time has come to sell tech stocks”.
“But our view is that the move does not mark the start of a renewed decline in tech similar to March,” said chief investment officer Mark Haefele. “A correction need not signal the end of the rally.”
The rise in European stocks came despite signs that Europe’s economic recovery is running out of steam. A 1.2 per cent rise in German industrial production in July undershot economists’ consensus expectations for a 4.8 per cent increase.
Investors are awaiting a European Central Bank monetary policy meeting on Thursday, which may offer clues on policymakers’ next steps to support the eurozone economy.
“We expect [ECB president] Christine Lagarde to deliver a very dovish message,” said Jonas Goltermann, senior economist at Capital Economics. “That will include publishing new, lower, inflation forecasts. But policy settings are likely to remain unchanged for now.”
Sterling fell sharply against the euro on Monday, shedding 0.7 per cent to €1.1136, as fears mounted that a trade agreement between the UK and the EU will be scuppered if Boris Johnson’s government goes through with plans to override the withdrawal agreement. The pound fell by a similar degree against the dollar to $1.3190.
US markets are closed on Monday for the Labor Day holiday but futures for the benchmark S&P 500 were marginally lower and those tied to the Nasdaq 100 were down 1 per cent.
Chinese shares accelerated their losses near the close of trading. The mainland’s CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 2.1 per cent and Hong Kong’s Hang Seng index dropped 0.5 per cent.
SMIC’s Hong Kong-listed shares fell 22 per cent after Reuters reported that the Trump administration was considering adding the Chinese chipmaker to a trade blacklist. Fears that other companies could be next overshadowed upbeat economic data: Chinese exports rose by more than analysts’ expectations in August, pushing the country’s trade surplus to its highest level this year.
Elsewhere in the Asia-Pacific region, Japan’s Topix fell 0.4 per cent while Australia’s S&P/ASX 200 added 0.3 per cent. Stocks in Tokyo were led lower by SoftBank, which shed more than 7 per cent after it was revealed on Friday that the Japanese conglomerate had spent billions of dollars snapping up stock options on individual US tech shares.
The muted moves in Asian trading came after a volatile week for Wall Street as investors turned against the tech sector after a breathtaking rally, and anxiety grew about November’s presidential election.
Despite the setback in US markets, Peter Oppenheimer, chief global equity strategist at Goldman Sachs, said that the bull market is likely to continue.
“Policy support remains very supportive for risk assets,” he said. “There is both a central bank ‘put’ — a belief that central banks will be there to provide as much liquidity as is required — and a fiscal ‘put’ as governments have scaled up their willingness to support growth.”
Oil prices dropped after Saudi Aramco said on Sunday that it would cut prices on crude shipments to Asia. Brent crude, the international benchmark, fell 1.3 per cent to $42.12 a barrel while US marker West Texas Intermediate declined 1.4 per cent to $39.21 a barrel.