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European stock markets close lower red after micro flash-crash

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LaToya Harding
·Contributor
·4 min read
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UK prime minister Boris Johnson has confirmed that Britain is still on track to ease all restrictions by 21 June, including the COVID-19 social distancing rule. Photo: Lindsey Parnaby/WPA Pool/Getty
UK prime minister Boris Johnson has confirmed that Britain is still on track to ease all restrictions by 21 June, including the COVID-19 social distancing rule. Photo: Lindsey Parnaby/WPA Pool/Getty

European stock markets fell in to the red on Tuesday afternoon after a suspected "micro flash-crash" caused equities to tumble.

Bourses in Europe opened higher after the bell as most major economies continue the slow grind towards normality. However, a sudden jolt after midday occurred without any obvious cause.

The move, which was about a fall of 0.5%, confused traders, especially as there was a similar drop on Wall Street futures around the same time.

The FTSE 100 (^FTSE) closed 0.67% lower in London, while the French CAC (^FCHI) lost 0.89%. 

The auto-heavy DAX (^GDAXI) in Germany slumped 2.49% as chip shortages caused car production lines around the world to shudder to a halt. The car industry is currently at the back of the queue behind tech firms and games console manufacturers after reducing orders at the start of the pandemic.

“Not a great deal of movement in other assets but equity futures hit an air pocket,” an equity sales trader based in London tole Reuters. “Looking at the price action and volume, a sense the machines took over for a second and resulted in a micro flash-crash.”

Meanwhile Fiona Cincotta, senior financial markets analyst at City Index, said: "We’ve had this spectacular run-up, and I think we’ve seen momentum just run out of steam."

“Despite earnings being encouraging, they haven’t managed to push those indices higher. Moving out of growth and into cyclicals is the place we’re going to have more movement.”

Read more: Travel stocks rally as EU prepares to open borders to vaccinated holidaymakers

On Monday, prime minister Boris Johnson confirmed that Britain was still on track to ease all restrictions by 21 June, including the COVID-19 social distancing rule requiring people to stay at least one metre apart.

During a campaign visit to Hartlepool, he said: "We do want to do some opening up on May the 17th, but I don't think that the people of this country want to see an influx of disease from anywhere else. I certainly don't. We've got to be very, very tough, and we've got to be as cautious as we can.”

According to the latest government figures, some 34.5 million people in the UK have received a first dose of the coronavirus vaccine, while 15.5 million have received their second jab.

Investors will also be keeping a watchful eye on elections this week as local and Scottish elections take place on Thursday.

The outcome of the election could have a huge effect on financial markets and the UK economy, particularly if the SNP wins a majority of seats.

This is because Nicola Sturgeon's party, along with the Greens, are hoping for a second referendum on Scottish independence, with the aim for an independent Scotland to rejoin the EU as quickly as possible.

READ MORE: What the Scottish election means for the economy, your investments and the pound

Across the pond, the S&P 500 (^GSPC) dipped 1.45% and the Dow Jones (^DJI) slumped 0.80% lower at the European close. The tech-heavy Nasdaq (^IXIC) fell 2.88%. 

“In the US, there is further evidence of the “reopening” trade, with investors anticipating stocks and sectors likely to benefit from the return to some kind of normality,” Richard Hunter at Interactive Investor said.

“This in turn has applied some pressure on tech stocks, despite their largely upbeat earnings numbers, where valuations are coming under increasing scrutiny as the scale of their recent pandemic success comes into question as lockdowns subside.”

Trading in Asia was thinned out by public holidays in China and Japan, however share markets were mostly higher.

MSCI's broadest index of Asia-Pacific shares outside Japan closed up on the back of a positive lead from Wall Street overnight.

Hong Kong's Hang Seng index (^HSI) climbed 0.56%.

Japan and mainland China's markets remained closed on Tuesday for holidays, dampening trading volumes across the region.

Watch: What are SPACs?