Markets plunge as war in Europe looms
MBig losers in the tech-heavy Nasdaq index include Netflix, which fell 2.6% and lost nearly a third of its value last week on lower subscription growth, and Internet service company Baidu, which fell 5%.
Zoom, the videoconferencing business that was embraced by millions at the start of the Covid crisis, briefly slipped below its pre-pandemic level before rallying to end the day pretty much flat.
Bitcoin soared, initially tumbling more than 8pc before recovering. It is down 29% this month as investors shift their money to less risky assets such as bonds.
The drop hit shares of Tesla, which fell 5.6% on Monday. Elon Musk’s carmaker placed a $1.5bn (£1.1bn) cryptocurrency bet about a year ago and is now at risk of losing its investment.
Tesla sold some of his bitcoins last year, but his remaining holdings are now believed to be worth less than he paid for them.
Market concerns were underscored by data from the Purchasing Managers’ Index which showed that US economic activity slowed in January.
Analysts at investment bank Jefferies said the selloff could signal to markets that the United States is entering a recession. John Canavan of Oxford Economics said the sale was “a high point[s] the risks of an aggressive Fed”.
The Federal Open Markets Committee is expected to continue its transition to a tougher policy when it meets on Wednesday. Krishna Guha of investment bank Evercore said anything but the most hawkish language was likely to “bring some relief to the markets”.
The sell-off panic also sent shockwaves through other assets, with US bond yields falling and the dollar surging as investors sought safe-haven assets for their money.
The pound, which had had a good start to the year that put it inches from a post-referendum high against the euro, fell against both the common currency and the dollar.
Jordan Rochester of Nomura advised clients to sell the pound, betting that the currency will fall in the short term. He warned that “cracks are beginning to appear” in Britain’s economic recovery.
Tensions are also emerging in other parts of the market, with credit risk gauges in the United States hitting their highest level since November 2020 on fears that a rising cost of borrowing could push many debt-ridden businesses over the edge.
Exchange-traded fund Ark Innovation, managed by Cathie Wood, fell the most since March before recovering most of its losses later in the session.
The tech-heavy fund was seen as an indicator of investors’ appetite for risk. Its recent plunge means it is now only narrowly outperforming legendary investor Warren Buffett’s more conservative portfolio since the start of the pandemic.
Some traders are now building their bets against ARK, with 8.6% of its shares held by short sellers according to IHS Markit data.