“Global equities rout continues overnight”

Miles Eakers, Chief Market Analyst at Centtrip

 

“The global sell-off in equity markets, which began last Friday, turned into a rout yesterday in the US, as the S&P 500 dropped a further 4.1%, suffering its biggest fall in six years. The tumble continued overnight, with the Japanese Nikkei 225 index sinking 5%. This move is likely to continue in European markets today.

“The sharp plunge follows last Friday’s positive economic data from the US. But the good economic news is not so good for bonds – they were sold off, driving yields on government debt higher. For now, this could just be a correction.

“As stock prices have surged to their highest level, the ratio relative to a company’s per-share earnings was very close to what was happening just before the Wall Street Crash of 1929 and the dotcom bubble in 2001. Most economists argued equities were overpriced and that a correction was healthy. But should this rout continue, panic selling and fear could kick in and trigger a sharp correction lower.

“Similarly to global stock markets, Bitcoin continues to plummet and is now well below last year’s $20,000 a coin level. Following news of more regulation in Asia, the cryptocurrency has now fallen through the $6,000 a coin level and is likely to continue to drop. We anticipate Bitcoin will suffer more losses, with the next technical level likely to reach $5,000 a coin.”