In Depth

Why are global stock markets plunging?

Asian markets slide as US Nasdaq index sees largest loss in seven years

Global stocks continued to slide this morning as a selling frenzy swept across markets from the US to Japan, fuelled by factors including trade tensions from the US-China trade war, worries about slowing economic growth and a massive drop in tech shares.

The Nasdaq - the world’s second-largest stock exchange in terms of market capitalisation - bore the brunt of the sell-off of tech stocks including Apple, Microsoft and Google owner Alphabet. By the time trading drew to a close last night, the tech-heavy exchange had fallen by 4.4%, its largest one-day drop in seven years.

Meanwhile, the Dow Jones shed more than 600 points, while the S&P 500 Index fell by 3.1% - erasing all of the gains for 2018 in both markets, reports CNBC.

“Against a backdrop of rising interest rates and growing trade tensions, a feeling that the best days of the economic cycle were in the past was taking hold,” says the Financial Times.

European tech stocks were also hit by the global sell-off. The Europe-wide Stoxx 600 fell by 1%, while London’s FTSE 100 lost 1.1%.

Asian investors joined in the market rout, with South Korea’s Kospi index and Japan’s Topix on track to record their worst numbers since the 2008 financial crisis.

Asian stocks have now lost almost $5trn this year, according to Bloomberg. The MSCI Asia Pacific Index - a broad measure of stocks across the region - had dropped by around 2% as of Thursday afternoon, “taking its slide from a January peak to 22%”, the news site reports.  

 However, leading investment firm Nomura Asset Management believes the Asian downturn is temporary, as “Chinese companies are in strong financial shape and have the capacity to buy back shares and boost dividends”, Bloomberg adds.

When it comes to the global scene, Kelvin Tay, regional chief investment officer at UBS Wealth Management in Singapore, says that a host of factors are contributing to poor sentiment, including “rising rates, weak third-quarter corporate results, tensions in the European Union over the Italian fiscal stand-off and Brexit, and US-China trade concerns”.

“The market is trying to decide if the solid global economic fundamentals we’ve had till now are starting to give way to a period of weaker growth,” he said.

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