Global shares were lackluster on Friday as disappointing earnings in the tech sector and an overall slowdown in the industry weighed on investor sentiment. The MSCI World index, which has seen a 16% increase this year, dipped by 0.3%. Europe’s Stoxx 600 remained flat, while Germany’s tech-heavy Dax slipped by 0.3%. This comes after Tesla and Netflix reported significant post-earnings declines earlier in the week. Tesla’s shares fell by over 9% after a decrease in profitability in the second quarter, indicating squeezed margins for the electric vehicle manufacturer. Netflix shares dropped by over 8% after missing sales estimates. Taiwanese chipmaker TSMC also warned of a sales decline this year, resulting in a 3.3% drop in share price. As a result, the European technology sub-index lost 0.9%.
These developments followed the 2% fall in Wall Street’s tech-heavy Nasdaq share index on Thursday, marking its largest one-day loss since March. German software maker SAP also saw a decline in shares after reporting sales for its cloud computing unit that missed analyst estimates. Concerns about tech stock valuations and the potential of artificial intelligence, which has contributed to the Nasdaq’s 40% year-to-date gain, prompted investors to take profits.
Patrick Spencer, vice-chair of equities at Baird, noted that the market had become overbought and suggested that those who had not participated in the market had missed out. He also mentioned that the special rebalancing of the Nasdaq 100, scheduled for the close of trading on Friday, could result in some peculiar price action in tech mega-caps. The rebalancing aimed to reduce the heavy weightings of tech giants like Microsoft and Apple, but it could potentially exacerbate stock movements during the ongoing earnings season.
However, Spencer predicted that optimistic tech investors would view sustained price weakness as an opportunity to reinvest. Looking ahead, market participants are anticipating the meetings of the US Federal Reserve and the European Central Bank next week. Both institutions are expected to raise interest rates by 0.25%. The Fed’s outlook will be closely observed as it seeks to manage inflation while avoiding a potential recession triggered by rate hikes.
Overall, the global shares market experienced subdued activity on Friday due to disappointing tech sector earnings and a general slowdown in the industry. The Nasdaq and European technology shares faced significant declines after Tesla, Netflix, and TSMC reported negative results. Concerns about tech stock valuations and the upcoming rebalancing of the Nasdaq 100 added to investor unease. The market now awaits the monetary policy decisions of the US Federal Reserve and the European Central Bank, both expected to raise interest rates by 0.25%.
Sources: Reuters