Tech Selloff Hits Europe and Asia


  • U.S. stock futures turn higher
  • Tech shares fall in Europe and Asia
  • Trade tensions stalk China stocks

Escalating trade tensions and a selloff in technology companies sent shares lower in Europe and Asia on Tuesday, although U.S. indexes were poised to rebound after a rocky start to the quarter.

The Stoxx Europe 600 fell 0.5% midday, echoing a mostly downbeat session in Japan and China and a steep decline in U.S. stocks Monday.

While S&P 500 futures were up 0.5% Tuesday, shares of technology companies led declines in markets outside the U.S. as traders largely took cues from a bumpy day on Wall Street in the previous session when European markets were closed.

The Nasdaq Composite fell 2.7% and the S&P 500 shed 2.2% Monday to close below a key technical level, as the so-called FAANG stocks of

Facebook
,

Amazon.com,

Apple
,

Netflix

and Alphabet wiped out $78.7 billion. President

Donald Trump

blasted Amazon’s practices and Tesla received rebukes from the National Transportation Safety Board over disclosures it made about a fatal crash, adding to recent pressure on the sector.

“Tech has provided strong leadership for equities for some time, and with concerns about regulatory risk and business models, that potentially raises the risk that the current correction extends,” said

John Stopford,

head of multiasset income at Investec Asset Management.

Europe’s technology sector fell 1% Tuesday, bringing this year’s decline to 3.2%, while Japan’s Nikkei Stock Average ended down 0.5%—after earlier being down as much as 1.6%—with tech exporters including electronics company TDK and Fanuc, a maker of industrial robots, leading the declines.

The recent pressure on tech giants, which led gains in 2017 and early 2018, has driven many investors to question once popular strategies that involve purchasing the stocks that have gone up the most in a bet on their continued strength.

“There is no safety in momentum anymore,” said

Alain Bokobza,

head of global asset allocation at

Société Générale
,

who noted that credit spreads have also risen after narrowing for a long time and low volatility has become higher, underscoring the shift in the market.

The prospect of a trade war between the U.S. and China also added to the downbeat tone, investors and analysts said. China announced tariffs Sunday of as much as 25% on American pork and eight other kinds of goods, as well as 15% tariffs on fruit and 120 types of commodities. The tariffs were retaliation for the 25% steel and 10% aluminum tariffs imposed by the Trump administration last month.

The retaliatory tariffs announced by China, though small as a proportion of U.S. exports, may yet have a bigger impact on economic growth by hitting market confidence and delaying investment decisions, Moody’s Investors Service said in a report.

The Shanghai Composite fell 0.8% while the startup heavy ChiNext index fell 1.5%.

“It’s almost like a whack-a-mole game of risk…this revolving door of issues popping up regularly that in aggregate are dampening risk sentiment,” said

Katie Nixon,

chief investment officer at Northern Trust Wealth Management.

The longer this choppy trading continues, the less “buy the dip mentality” we will see, she added, although she expects strong earnings growth will continue to power the stock market higher this year.

Analysts increased their earnings per share estimates during the first quarter by the most since at least 2002, marking a 5.4% climb in estimates in the first three months of the year, according to FactSet.

Haven assets gave back some gains Tuesday. The yield on the U.S. 10-year Treasury note rose to 2.758% Tuesday, up from Monday’s two-month low of 2.717%. Yields move inversely to prices.

Gold fell 0.4% to $1,341 an ounce and the dollar rose 0.3% against the Japanese yen.

—Gregor Stuart Hunter contributed to this article.

Write to Riva Gold at riva.gold@wsj.com



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