Global markets chalked up their longest weekly losing streak in five years on Friday, as Wall Street reacted to worse-than-expected results from US tech giants.
The fifth consecutive week of losses would represent its worst period since May 2013. The global index has dropped by 9.5% since the start of the month, the second largest sell-off of the year following turmoil in February.
British companies on the FTSE 100 fell by 0.92%, with the index hitting its lowest level in seven months at one point on Friday, before recovering slightly to the lowest close since March. The share price of the steel producer Evraz fell by more than 6%. The grocery delivery firm Ocado lost 5%, while BT Group, Royal Bank of Scotland and Royal Mail all dropped by more than 4%.
The slide was matched on Europe’s other large markets. Germany’s Dax index fell by 0.94% while France’s Cac 40 lost about 1.29%.
Shares across Europe have suffered from nerves around the Brexit negotiations, with UK government ministers still insisting that leaving the EU without a deal is a possibility. Economists predict that a no-deal Brexit would cause significant damage to earnings for companies in the UK and Europe.
The Italian government’s dispute with the European commission over its budget has also added to the risk aversion in the EU. Italy’s new government decided to increase spending dramatically, pushing the deficit to 2.4% of GDP, three times higher than planned. The commission rejected the budget under an EU review process.
In the US, investors have grown increasingly concerned in recent weeks on the valuations of large firms, even as GDP growth in the world’s largest economy has continued to impress. The latest US GDP figures, published on Friday by the Bureau of Economic Analysis, showed annualised growth of 3.5% in the third quarter, after an even faster rate of 4.2% in the previous quarter.
US GDP growth was supported by the strongest burst of consumer spending in nearly four years, but analysts questioned the sustainability of the boom.
“Investors must be asking the question how much longer can consumers maintain this pace for,” said Chris Towner, a director at risk management consultancy JCRA.
Gregory Daco, chief US economist at consultancy Oxford Economics, said in a note to clients that the US economy “continues to show resilience”, but said he expects “more moderate growth in 2019”.
The US Federal Reserve is expected to continue on its path of raising interest rates, raising borrowing costs for firms around the world. Investors have also been spooked by the threat of disruption from a trade war between the US and China, prompted by the protectionism of the US president, Donald Trump.
The robust performance of the US economy in the third quarter was overshadowed on Friday by the fallout from technology company results overnight, which showed revenue growth below analyst expectations, adding to concerns that American firms will be unable to sustain profits at current strong levels.
Amazon on Thursday delivered record profits of almost $3bn for the last three months, but revenue growth was slower than expected.
Alphabet also missed analysts’ revenue expectations. The parent company of Google was also under pressure after a New York Times report alleging that it paid executives after they were accused of sexual harassment.
“We’re going through this transition where, earlier in the year, the corporate earnings results were just a blowout and now they’re more mixed,” said David Lefkowitz, senior equity strategist Americas at UBS Global Wealth Management. “That’s causing some of this volatility.”
New York’s Nasdaq index was down 2.07% at close on Friday, continuing a bumpy week for US stocks. The S&P 500 fell by 1.73% and the Dow Jones industrial average dropped 1.19%. Media and communications stocks, banks and healthcare companies also took heavy losses on US markets.
On currency markets, sterling fell against the US dollar to $1.2777, its lowest level in more than 10 weeks, before bouncing up to close at $1.2820. The euro also hit a 10-week low against the dollar during the day.
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