European equities rose as futures trade signalled US technology stocks would steady after a heavy sell-off the previous day.

MSCI’s broad measure of stocks in developed and emerging markets slipped 0.1 per cent on Friday as modest gains in Europe were balanced by declines across many Asian markets. The gauge tumbled 2.5 per cent on Thursday in its deepest fall since June.

Futures trading suggested the big sell-off in US tech shares that drove global markets lower on Thursday would ease. Contracts tracking the Nasdaq 100 index of the largest companies on the tech-heavy Nasdaq Composite were flat in recent trading. The more evenly balanced S&P 500 index was poised to drift modestly higher.

In Europe, the continent-wide Stoxx 600 rose 0.5 per cent during the European morning, with markets in London, Paris and Frankfurt recording similar gains.

Shares in major tech companies suffered heavily on Thursday, with Apple falling 8 per cent, wiping more than $150bn from the company’s market capitalisation. Amazon, Alphabet and Microsoft all ended Thursday’s session down more than 4 per cent. The falls spilled over into Asian markets, with Australia’s S&P/ASX 200 closing 3 per cent lower on Friday and Hong Kong’s Hang Seng index losing 1.3 per cent.

Thursday’s Wall Street drop was accelerated by funds that execute trades automatically using sophisticated models, said Remi Olu-Pitan, multi-asset fund manager at Schroders. A sharp rise in measures of expected volatility likely pushed them to begin selling, she added.

“Quant funds that run momentum strategies will have built up a big bias to tech,” said Ms Olu-Pitan. “The higher volatility is a trigger for these quant funds to sell off.”

Retail investors who have piled into technology shares during the pandemic, recognising the prospects of the likes of Zoom and Apple from homeworking and spending more time on screens, “then became nervous and reacted quickly”, Ms Olu-Pitan added.

Carl Hammer, a strategist at Scandinavian bank SEB, added that while tech company shares had exhibited swings reminiscent of the end of the 1990s dotcom boom, the outlook for equities remained positive.

“We cautiously expect more gains from equities,” he said. “The general view in the market is that it is incredibly hard to make any returns in the portfolio if you don’t have a substantial share of equities in that portfolio.”

Mr Hammer pointed out that aggressive monetary stimulus from global central banks had driven income yields on government bonds to ultra-low levels in the US and negative in some cases in Europe, citing the German 10-year Bund, which yielded minus 0.475 per cent on Friday morning, as an example.

The dollar, which has weakened significantly throughout the pandemic, traded steadily, with the main gauge of its performance against trading partners’ currencies flat at 92.8, which is around a two-year low.

US government bonds declined slightly in price in the run-up to US payrolls data, which is due at 8.30am New York time. The yield on the benchmark 10-year Treasury ticked 0.03 percentage points higher to 0.651 per cent.


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