Tumbling stock markets
6 February 2018
Sharp stock market falls have sparked concern this morning, but is there a reason to see this as the start of a long-lasting trend? Here’s what ING economists think.
The original catalyst for the sell-off was the unexpectedly strong January wages growth in the US, which raised concerns that interest rates might rise more rapidly than anticipated to tackle inflation.
As a result, we saw the biggest fall in the US stock markets since 2011.
The selling pressure continued in Asia and is also being seen in Europe.
Temporary correction?
‘’While risk assets will likely remain under pressure today and in coming days, we don’t see this sell-off as the start of a long-lasting trend’’, said Petr Krpata, ING’s chief EMEA FX and IR strategist.
ING’s Chief International Economist James Knightley agrees that this appears to be more of a “healthy” correction rather than the start of a broader re-evaluation for earnings.
That is not to say that we won’t see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings, James argues.
In his opinion piece, Rob Carnell, head of Research Asia-Pacific, says that ‘’there has been nothing substantial overnight to propel further losses, merely the sell-off of the previous day gathering momentum’’.
“We have some way to go yet before these markets begin to look attractive to the value community. The S&P500 is, for example, not even down a full percent year to date, though that probably tells us more about how strong the gains in January were than anything else.”
Follow the discussion on ING’s Economic and Financial Analysis page THINK.