If one fails, the rest follow (sometimes). Over the past couple of days, the U.S. stock market has seen a drastic decline in different areas. However, what is also certain is the fact that other global markets have followed in a similar downwards spiral in their respective markets. This domino effect has affected markets in Asia and Europe as well. Let’s take a closer look at what exactly is happening and more specifically, what areas are in trouble the most.
In The United States:
After reporting losses on Wednesday, the Dow and S&P 500 faced a fall again at the market open on Thursday. With a steep decline in tech stocks, the DJIA fell 832 points yesterday, the biggest drop since February. The FAANG tech stocks faced deep trouble yesterday, with Facebook FB and Apple AAPL down almost 4%, Amazon AMZN falling 6%, and the most drastic decline was Netflix NFLX at almost 8.5%.
With the rise of U.S. treasury yields and the Federal Reserve announcing an increase in interest rates, investors are rattled about what they should do next. This caused the selloff of major tech stocks, as investors are more inclined to buy cheaper stocks with a higher interest rate than invest in major companies. According to CNN, since tech stocks are vulnerable and the most highly valued part of the stock market, investors are more likely to offload tech companies and move towards assets that are less risky.
Following the decline of the stock market in the U.S., Asia faced its own worries. In China, the Shanghai Composite fell almost 5.22%, reaching its lowest level since 2014. Similar to the U.S., China’s tech stocks were hit hard. According to CNN, Chinese social media and gaming company Tencent TCEHY and smartphone maker Xiaomi fell 6% and 8%, respectively.
Although it has been going on for a while, the tensions between China and the United States further added to the fuel to the fire. According to The New York Times, the market in Shanghai was already in bear-market territory, since stocks in China have been declining for the past couple of months. However, managing director of the International Monetary Fund, Christine Lagarde, warned that if tensions between China and the United States continue to escalate, the global economy would suffer a significant hit.
Markets in Europe fell as well, but not as much compared to the U.S. and Asia, seeing as stocks had already been declining for quite a while in that area. London's FTSE 100 and France's CAC both fell almost 2%, while Germany's DAX fell almost 1.5%. As mentioned before, the U.S. and Asia’s tech sector tumbled the hardest, but in Europe the luxury goods sector saw its own fall. Luxury companies like Moncler and Fiat Chrysler FCAU saw a decline in their stock prices, by 5% and 2%, respectively. However, FCAU was up 0.78% on the NYSE today.
In the End:
If the United States doesn’t figure out what to do soon, the domino effect will continue to play out. It is clear that these global markets are in a steep decline and are facing trouble because of the U.S. As of now, the only thing investors can do is wait it out and see what the risks might be involving the treasury yield and other global markets.
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