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Tech Leads Stocks Lower, Nasdaq Futures Slump: Markets Wrap

(Bloomberg) — Technology companies led a drop in European stocks and futures on the Nasdaq pointed to fresh losses on concern valuations have reached extremes. The pound weakened for a fifth day amid Brexit fears.

Tesla Inc., Apple Inc. and Microsoft Corp. dropped in U.S. pre-market trading and Nasdaq futures slid as much as 2.5%. EasyJet Plc shares slumped after the discount airline said flight demand is lower than expected. Treasury yields fell, the dollar index strengthened and oil traded near a two-month low.

After technology shares led a powerful rally out of the pandemic lows, investors have recently turned skittish that the speculative fever has gone too far. The U.S. and China relationship is also back in focus after President Donald Trump said he plans to end America’s reliance on the country. Trump also threatened to punish any American companies that create jobs overseas, and to forbid those that do business in China from winning federal contracts.

Trump Vows to Sharply Scale Back U.S. Economic Ties With China

“The path of least resistance for the market may well be to test the downside,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “Ultimately, if there is more selloff, I suspect real money investors will take the opportunity to buy the dip.”

Tesla shares fell 10% after the carmaker was passed over for inclusion in the S&P 500. Royal Mail Plc, the privatized British postal service, surged 15% after saying it wants to overhaul its business and shift service to the parcels market.

In the U.K., the pound weakened and stocks slumped after Prime Minister Boris Johnson vowed he “won’t back down” over sticking points in Brexit trade talks with the EU. Gilts pushed higher as the heated discussions provide a boost for the U.K.’s first syndicated bond offering since June.

The Turkish lira weakened to an all-time low against the dollar for a fourth session amid concern that monetary policy remains too loose to backstop the currency.

Equities rose in Asia, with shares in Australia and South Korea leading the advance.

Here are some key events coming up:

The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index fell 0.7% as of 6:48 a.m. New York time.The Stoxx Europe 600 Index gained 0.4%.The MSCI Asia Pacific Index was little changed.The MSCI Emerging Market Index dipped 0.4%.

Currencies

The Bloomberg Dollar Spot Index gained 0.6%.The euro declined 0.2% to $1.1793.The British pound fell 1% to $1.3039.The Japanese yen was little changed at 106.29 per dollar.The offshore yuan weakened 0.2% to 6.8437 per dollar.

Bonds

The yield on 10-year Treasuries fell three basis points to 0.69%.The yield on two-year Treasuries dipped less than one basis point to 0.14%.Germany’s 10-year yield declined two basis points to -0.49%.Britain’s 10-year yield sank five basis points to 0.211%.Japan’s 10-year yield decreased less than one basis point to 0.04%.

Commodities

West Texas Intermediate crude declined 4% to $37.94 a barrel.Brent crude dipped 3.3% to $40.95 a barrel.Gold weakened 0.9% to $1,916.45 an ounce.

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