FTSE 100 to fall on “brutal” tech stocks sell-off

The FTSE 100 is forecast to tumble this morning as a sudden sell-off in technology stocks across the Pond continues to punish Europe.

US tech stocks have basked in the limelight since lockdowns across the globe sent consumers scurrying for their nearest device. The buying spree has powered the sector’s biggest names, notably Apple, Netflix, Amazon, Alphabet, Microsoft and Tesla to huge gains, lifting the tech-focused Nasdaq 100 index to record highs.

But yesterday a sudden sell-off gathered pace rapidly, bleeding across into European markets. CMC Markets analyst David Madden labelled the decline “brutal”. “Panic selling set in and equities across the board suffered as a result. In the end, the Nasdaq 100 finished down more than 5%, and the S&P 500 lost 3.5%,” he said. The FTSE suffered a 1.4% fall yesterday, and is expected to open 33 points lower at 5,817.

Market observers noted that it may be the first time that the army of day traders who have weighed into the stock markets since the Covid crash have suffered serious losses.

Jeffrey Halley, senior market analyst for Asia Pacific at Oanda notes that the sell-off was confined to stocks. He said: “What is particularly interesting is not what did happen, but what didn't happen. The US Dollar finished the day almost unchanged with the dollar index up only 0.14%. No signs of massive safe-haven flow there.

“Gold fell only 0.60% when in stock selloffs of Christmas past, gold would have been cremated as cash was raised to cover equity margin calls. US Yields fell only slightly across the curve.

“If we were facing a massive risk-off event, yields would have plummeted as investors rotated into US government bonds. Even Brent crude and WTI only fell by around 40 cents a barrel.”

Madden added: “Putting aside the carnage in the tech sector there were some positive sounds from the US in regards to the pandemic. The Centre for Disease Control (CDC) said that health officials need to be ready to distribute a Covid-19 vaccine around the country from as early as November.

“The fact the CDC are talking in those terms suggests they are hopeful that a drug might be developed in the near-term. Dr Anthony Fauci, an expert in diseases, said it is very unlikely that a pharmaceutical company would develop a vaccine by the end of October, but it wouldn’t be impossible.”

Today, in a quiet day for corporate news, investors will be focused first on the UK construction PMI report – expected to show a reading of 58.5 for August, up from 58.1 in July – and then US non-farm payroll data at 1.30pm.

Economists forecast 1.4 million jobs were added in August, a fall from the 1.76 million created in July. The unemployment rate is expected to fall to 9.8% from 10.2%.