Fear grips markets as Wall St, European stocks slide

Fear was back on the agenda as stock markets on both sides of the Atlantic were weaker, with Apple and Alphabet the only members of the Magnificent 7 megacap stocks on the green side of the ledger, amid the latest US private employment figures showing increased job losses led by artificial intelligence-driven restructuring in tech, warehousing and retail.

Tesla was on the red side of the ledger ahead of its annual meeting, where chief executive Elon Musk’s US$1 trillion remuneration package is up for a vote, with Noway’s Norges Bank Investment Management and Californian pension fund CalPERS voicing their opposition.

Meanwhile, the Bank of England kept its benchmark rate at 4% as the UK grapples with persistently high inflation, a soggy economy and soft labour market.

And that downbeat sentiment is flowing into the antipodes with Australian futures pointing to a soft start when the S&P/ASX 200 index opens and the kiwi dollar hitting a new seven-month low, while Spark New Zealand’s annual meeting is the main corporate event in the local calendar.

Heightened volatility

Stocks on Wall Street and in Europe sank with the volatility index spiking higher and the yield on US 10-year Treasuries falling 6 basis points to 4.09% after a new report showed a sharp increase in job losses, with firms cutting staff to reduce costs and use AI systems.

“US Treasuries reversed the previous day’s selloff, with the market supported by some soft US labour market reports, with rates down about five-to-eight basis points for the day,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Yesterday we noted that given the lack of official data through the US government shutdown second-tier private sector data were having an unusually large influence on the bond market, and we can say the same today.”

The tech-heavy Nasdaq Composite led declines on Wall Street, falling 1.5% in late trading, with the Magnificent 7 megastocks pacing those declines, with Apple and Alphabet the only majors on the green side of the ledger. Frothy valuations among the big tech companies spending large on AI infrastructure has made some investors nervous.

Meanwhile, Tesla dropped 3.8% ahead of its annual meeting, where chief executive Elon Musk’s remuneration is up for a vote, with Norway’s sovereign wealth fund and Californian pension fund CalPERS – which counts NZ Super Fund alumni Stephen Gilmore as its chief investment officer – have thrown their weight against the potential US$1 trillion payday.

Magic pills

Health stocks weren't hit as hard with Denmark’s Novo Nordisk advancing and Eli Lilly & Co nudging lower after the weight loss drugmakers cut prices of their popular drugs after cutting deals with the White House and will get Medicare coverage for the GLP-1 medicines.

Private marketplace Forge Global surged after Charles Schwab lobbed in a US$660 million takeover, following Morgan Stanley’s lead in buying EquityZen last week.

European stock markets were also weaker, with the UK’s FTSE 100 down 0.4%, Germany’s DAX 30 falling 1.3% and France’s CAC 40 dropping 1.4%.

The Bank of England kept its bank rate at 4%, as expected, in a line call for policymakers, with five of the nine votes in favour of holding. The UK is grappling with stubbornly high inflation and a slowing jobs market in a weak economy. The kiwi dollar fell to 42.94 British pence at 7am in Auckland from 43.34 pence yesterday.

That tone is set to carry on into the antipodes, with Australian futures pointing to a 0.2% decline for the ASX200 when trading opens across the Tasman, while the kiwi dollar fell to a fresh seven-month low against the greenback, trading at 56.35 US cents at 7am from 56.62 cents yesterday. New Zealand's S&P/NZX 50 index hit a new record on Thursday before pulling back to snap a nine-day run higher.

There’s no local data scheduled for today, although China’s trade figures will be watched.

Meanwhile, Spark New Zealand is holding its annual meeting in Auckland, where managing director Jolie Hodson and chair Justine Smyth are up for re-election after overhauling the board and rejigging its strategy after a series of soft earnings recent years.

Black Pearl Group, Colonial Motor Co and Marlin Global are also holding their annual meetings today.

Reporting by Paul McBeth. Image from Sean Benesh on Unsplash.