Economy - - Oct 11,2018
European stocks dropped abruptly in morning trade after worries involving a trade war together with higher US bond yields motivating concern among global investors.
On Thursday morning Europe stocks crash to their lowest, which is a repercussion of the steep losses that occurred in the U.S. overnight due to fears of rapidly swelling interest rates.
The International Monetary Fund (IMF) did issue an early warning this week which mentioned rumbling trade tensions like those between the U.S. and China, can cause a “sudden deterioration in risk sentiment, triggering a broad-based correction in global capital markets and a sharp tightening of global financial conditions."
It was observed that the pan-European Stoxx 600 went down by 1.8% during mid-morning deals, where financial services and technology stocks shared a major part of the losses. The vivid sell-off which happened at Wall Street during the previous session provoked the European benchmark to crash to its lowest level in the past 20 months.
The reason for the markets to fall is termed as an ‘obvious forecast’ by stock market experts. This is because since last year most markets have either acquired or are close to all-time highs, chiefly in America, where investors are part of the ball game.
Looking at last year statistics, there have been moments of a so-called "melt-up" period of a bull market, during which share price surges are concentrated within a few large companies. In the US markets, Apple, Facebook, Amazon, and Google have accounted for majority of the increase in the past 12 months.
However, the trigger for this recent fall is due to a sudden reaction from American government debt.
Several investors have initiated to sell down US government bonds, assuming they are not worth a good investment. Hence, it has triggered a session of realism that has impacted the stock market.
As per analyst Michael Hewson of CMC Markets, it is "too simplistic just to blame the Federal Reserve" regarding the current market chaos. He added that trade tensions between the US and China had pressed the Asian markets for the most part of this year, whereas trade tensions active between the US and the EU has evenly impacted the European markets.