World share markets were down for a second day running on Friday as a near $1 trillion weekly wipeout in top tech stocks outweighed hopes of a slowdown in Fed and ECB rate rises and news that the U.S. economy is not in recession yet. European shares were down nearly 1% as Thursday’s weak forecasts from Amazon and Apple sent the tech sector down over 2% and the prospect of renewed COVID curbs in China hit mining and oil firms.
World share markets were down for a second day running on Friday as a near $1 trillion weekly wipeout in top tech stocks outweighed hopes of a slowdown in Fed and ECB rate rises and news that the U.S. economy is not in recession yet.
European shares were down nearly 1% as Thursday’s weak forecasts from Amazon and Apple sent the tech sector down over 2% and the prospect of renewed COVID curbs in China hit mining and oil firms. In the bond markets, borrowing costs were also starting to creep up again although what analysts had described as a dovish ECB meeting on Thursday meant Germany’s 10-year Bund yields were set for their biggest weekly fall since October 1987.
The yen was weakening again too in the FX markets after Bank of Japan Governor Haruhiko Kuroda said it did not “plan to raise interest rates or head for an exit (from ultra low interest rates) any time soon” despite raising inflation forecasts. Heavy falls in China meant Asia-Pacific shares ex-Japan were closing 1.9% lower at 432 points which was just above a 2-1/2-year low touched on Monday.
MSCI’s main world index which tracks 47-countries was down 0.5% on the day although it, like both European and U.S. markets, was heading for its third weekly rise in the last four. It has been disappointing earnings forecasts that have hit markets in recent days.
Amazon.com and Apple were the latest tech behemoths to face heavy punishment from investors for their numbers on Thursday and nearly $1 trillion could be wiped off the big U.S. tech giants this week alone. Facebook parent company Meta has plunged 25% bringing its year-to-date slump to 70% or over $670 in value terms, while Apple’s disappointing forecast for the traditionally lucrative holiday season had sent it shares down 13% after hours.
“If sustained today that would drop it to a market cap of below $1 trillion. In November last year we were as high as $1.9 trillion, so quite a fall to say the least,” said Deutsche Bank strategist Jim Reid. DOVES
Effect On Meta
Facebook parent company Meta has plunged 25% bringing its year-to-date slump to 70% or over $670 in value terms, while Apple’s disappointing forecast for the traditionally lucrative holiday season had sent it shares down 13% after hours.
The BOJ’s widely expected move in Tokyo to keep its policy loose had come after the European Central Bank raised interest rates 75 bps the previous day, but said that “substantial” progress had already been made in its bid to fight off a surge in inflation.
Investors are now turning their attention to the Federal Reserve meeting next week. While a 75 basis point rate hike at the conclusion of its Nov. 1-2 policy meeting is all but assured, the likelihood of a smaller, 50 basis-point hike in December was 55%, according to CME’s FedWatch tool.
NatWest Shares Plunge After Warning On Rising Costs.
NatWest’s shares fell as much as 9% on Friday after the British bank warned of rising costs, and as its third-quarter results were hit by a deteriorating UK economic outlook that prompted an increase in bad debt provisions.
Britain’s economy is facing recession at a time when the Bank of England is raising interest rates to curb double-digit inflation, squeezing the finances of households and businesses.
NatWest (LON:NWG) set aside an additional 247 million pounds to reflect the gloomy outlook and said its costs next year would no longer be stable, in a sign of how soaring inflation is impacting bank finances.
The bank was also hit by a 652 million euro ($650 million) loss in its Ulster Bank business in Ireland – which it is in the process of exiting. NatWest said this was mainly due to a revaluation of its loans.
Pre-tax profit came in at 1.1 billion pounds ($1.27 billion) for July-September, slightly below analyst forecasts and unchanged on the prior year.
The lender’s shares were last down 8%, against a benchmark FTSE index down 1%.
“While the bank is in a reasonable position for now, we are expecting an arduous downturn in the economy by the middle of next year, which will rock the boat,” said Sophie Lund-Yates, analyst at Hargreaves Lansdown (LON:HRGV).
Analysts at JPMorgan (NYSE:JPM) said in a note that NatWest’s warning on costs could also lead to downward revisions for its profitability.
NatWest is the last of Britain’s “Big Four” banks to report results this week. Lloyds (LON:LLOY), Barclays (LON:BARC) and HSBC (LON:HSBA) earlier all reported solid profits but unsettled investors with higher bad loan charges.
The bank said its bad loan provisions reflected its more negative view of its existing economic scenarios, and it now expects house prices to fall 7% next year. Rival Lloyds adopted a similarly bearish view on Thursday, predicting an 8% drop.
NatWest CEO Alison Rose said the bank had not yet seen increased signs of financial distress from customers, but said the bank was closely monitoring the situation.
On costs, Rose told reporters the bank’s changed guidance partly reflected the need to increase pay for staff to help them cope with inflation.