European stocks reduced some of their earlier losses in mid-morning trade after tumbling 3 percent in the early hours of Tuesday’s session.
The pan-European Stoxx 600 was 1.7 percent lower with every sector in the red. Autos, banks and insurance stocks were the most impacted by the sell-off, down by about 2 percent.
Overall there was a sea of red across the European benchmark with only a couple of companies trading slightly above the flatline at about 9.50 a.m. London time. Austria Microsystems outshined every other company, rising 13 percent. The Apple supplier said that an investment partner agreed to fund 25 percent of its planned $600 million spending this year, Reuters reported.
On Wall Street, the Dow Jones industrial average dropped 1,175.21 points to close down at 24,345.75 on Monday — having briefly declined by more than 1,500 points during the session. U.S. futures extended losses on Tuesday overnight. Meantime in Asia, indexes closed sharply lower as the global sell-off continued.
The sell-off kicked into action on Friday, after the latest nonfarm payrolls report in the U.S. saw interest rates on sovereign debt jump. While there was no particular piece of news that pushed major U.S. indexes deep into the red on Monday, the recent moves in the bond market have added volatility and concern to market sentiment. Traders believe that inflation might kick in faster-than-expected.
Despite the ongoing sell-off, many managers are not panicking mode just yet.
“We’re not panicking, it’s obviously going to be a very bloody day on market,… but I have confidence in the portfolio,” Eric Moore, income fund manager at Miton Group told CNBC Tuesday morning.
“Nothing that has happened over the last 48 hours has made me think that the dividend characteristics of my portfolio are worse than I thought before,” he said.
Moore added that the economic fundamentals remain okay and the current sell-off feels like a technical correction after the several record highs registered in the past year.
Salman Ahmed, chief investment strategist at Lombard Odier, also downplayed the current sell-off. He told CNBC on Tuesday: “If the correlation between bond yields and equities switches, so if yields start to go up at the same time as equity becomes under pressure, then we will have to reassess our whole paradigm.”
Switching focus back to Europe, earnings and politics were also on investors’ minds on Tuesday.
BNP Paribas reported a worse than expected net profit for its fourth quarter of 2017, falling 1.1 percent to 1.43 billion euros ($1.77 billion) and missing market expectations. The stock fell nearly 1 percent.
Meanwhile, Intensa Sanpaolo announced an increase in both fourth-quarter and full-year net profits, beating analysts expectations. The company’s shares were up by 1.4 percent.
Swedish lender Swedbank reported a higher-than-expected increase in fourth-quarter operating profits, thanks to higher commissions and interest income, Reuters reported. The bank was up by 0.3 percent.
At the same time BP posted earnings above expectations on a surge in refining and trading during the final three months of 2017. Shares were off by 1.2 percent.
In other market news, the Velocity Shares Daily Inverse VIX Short-Term exchange-traded note (XIV) – a security issued by Credit Suisse, fell more than 80 percent in extended trading on Monday. Credit Suisse said in a statement that ”the XIV ETN activity is reflective of today’s market volatility. There is no material impact to Credit Suisse.” Nonetheless, the stock was one of the worst-performing banks in mid-morning trade, down by more than 4 percent.
Meanwhile on the political front, a new round of Brexit negotiations are set to kick off on Tuesday. Chief Brexit negotiator for the EU, Michel Barnier told the U.K. on Monday that the time had now come for the nation to make a decision on the type of relationship it wants with the bloc after it leaves the EU, according to Reuters. Consequently, the latest talks will mean investors will be paying close attention to the moves in sterling and the euro.
—Reuters contributed to this report
