Global Market Report - February 5, 2018

Global markets felt the chill from the Dow's late selloff on Friday

James Gard 5 February, 2018 | 11:20AM

Asia

Markets in Asia Pacific were the first to react this week to the sudden and sharp selloff in US markets on Friday. With the Dow Jones plunging nearly 700 points on Friday, or over 2.5%, it was inevitable that markets in Asia – where sentiment has been fragile of late after a strong start to the New Year – followed suit. Japan’s Nikkei fell by the same amount in percentage terms as the Dow, and with a near-600 point slide, retreated away from the 23,000 points level that was breached at the start of the New Year. The country’s Topix index was off over 2%, while Hong Kong’s Hang Seng

Chinese shares looked to follow the global rout, but by the close a gain in the Shanghai Composite Index had outweighed a fall in its Shenzhen equivalent. A strong showing in the China services survey helped provide some positive momentum for shares despite the pressure from world markets.

Europe

The UK’s equivalent services purchasing managers’ index came in lower than expected, like equivalent surveys for manufacturing and construction last week. The services PMI came in at 53 – 50 marks the difference between contraction and expansion – against a forecast for above 54 and a December reading of 54.2. The weak start to January for the UK economy was confirmed by IHS Markit, and that’s likely to trouble the Bank of England as it prepares to deliver its Inflation Report on Thursday – especially after better-than-expected economic growth in the fourth quarter of 2017.

The survey took the edge off an attempt by the pound to move higher in early trading. The global selloff also affected the FTSE 100, which was off over 1% in midmorning trading to 7,345 points, effectively erasing the gains made since the start of 2018. Only 10 shares were in positive territory by 11am local time.

Markets in Europe were also lower, but not to the extent of UK and Japan markets.

North America

The US also gets sight of services data in the form of the Markit and ISM releases, both just after the market opens. The data is expected to show the US economy expanding in the first month of the year.

Earnings season rumbles on, with hundreds of companies set to report this week. Nevertheless, the banks, tech giants and energy firms have all reported. Bristol Myers (BMY) is the highlight today.

Of greater concern to world investors will be if anxiety grips the US markets again – currently the Dow Jones is expected to drop 100 points at the open.

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Bristol-Myers Squibb Company58.90 USD1.85
About Author

James Gard  is subeditor for Morningstar.co.uk