Global Market Sell-off Gathers Pace After US Slide

The Dow Jones was the worst-affected US index last week, slumping 2.5% on Friday to record its worst one-day performance since June 2016. 

Over the week, the Dow Jones had lost 4.1% while the S&P 500 was down 3.9% and the Nasdaq fell 3.5%. This was the worst weekly-performance for the S&P 500 in two years. 

US equity markets have been in a euphoric state since President Donald Trump passed his historic Tax Cuts and Jobs Act reform, which saw corporation tax cut from 35% to 21%. This pushed the S&P 500 up 5.9%, marking its best start to the year since 1987, prior to the recent pull-back.

However, concerns over central bank policy and higher-than-expected inflation caused global bond markets to sell off on 29 January with 10-year Treasury yields rising to 2.73%, their highest point since April 2014.

Fears of contagion risk subsequently spread to equity markets last week as higher-than-expected US wage growth figures added to concerns the Federal Reserve may have to raise rates further and more aggressively than forecast.

This sell-off has spread over into Asian markets, with Hong Kong's Hang Seng index falling 2.7% on Monday while the Topix dropped 2.2% and South Korea's Kospi index was 1.3% lower.

According to the Financial Times, the Asian sell-off was also fuelled by concerns the recent rally could be faltering, after investors bought $7.9bn worth of Asia and emerging market funds at the end of January. 

Analysts at Morgan Stanley expect a near-term correction on the horizon, particularly for the Hang Seng index which it said was the most technically overbought since April 2015. 

Others were less concerned and viewed the sell-off as a "natural part of the cycle" rather than a correction, according to the Financial Times.

Meanwhile, shortly after trading began this morning, the FTSE 100 index was down 81.20 points, or 1.1%, at 7,362.23. The biggest losers were easyJet, NMC Health, Old Mutual and Ashtead Group, which are all down over 2% at the start of the session.

In addition, Germany's DAX was down 0.88% at 12,673 while the French Cac 40 was 1.06% lower at 5,308.