The FTSE opened lower four points higher on Tuesday but then promptly proceeded to decline following a big fall in technology stocks on Wall Street on Monday, where top five technology names Facebook, Amazon, Apple, Google parent Alphabet and Netflix lost a total of $87.7 billion in one day.
The S&P 500 closed down 2.23% but more importantly it fell below a key technical level while the Nasdaq Composite settled 2.74% lower after president Trump took to criticising Amazon on Twitter for a second time in three days over their pricing of deliveries.
US tech stocks have been declining for the past three trading days, erasing a significant portion of overall stock market gains made in the last twelve months.
Asian markets followed suit with an initial drop in the morning but then pared down their losses with the Nikkei closing down 0.45%. This followed a bigger earlier decline as China introduced import tariffs of up to 25% on 128 US products in response to a similar decision by the US. It prompted fears that the two major economies are heading for an escalating trade war.
GKN drops on takeover concerns
Shares in engineering firm GKN shares fell 2.16% on concerns that the company will be sold for parts if a hostile takeover by Melrose PLC is successful. Last week Melrose narrowly succeeded in gaining acceptance for its offer representing just under 53% of the voting rights in the FTSE 100 firm. The offer is now expected to become unconditional by April 19.
Mining companies in focus after ArcelorMittal bid and Anglo American suspension
Mining stock Vendanta Resources PLC will be watched closely Tuesday after ArcelorMittal and Japan’s Nippon Steel and Sumitomo Metal submitted a joint bid Monday or India’s failing steelmaker Essar Steel. The Arcelor/Nippon move comes in direct competition to Vendanta which is also bidding for Essar.
Shares in Anglo American traded higher 0.79% higher as the market warmed to the news that the company has suspended its Minas-Rio iron ore operation in Brazil following two pipeline leaks last month. The mining company ceased operations there last Thursday in order to carry out a full inspection of the pipeline that carries iron ore, in slurry form, from the mine to the export terminal.
Manufacturing PMI March decline expected
Markit's UK manufacturing Purchasing Manufacturers Index is due to be released later this morning and is expected to have registered a slight decline in March after adverse weather hindered factory output and disrupted supply chains.
This would be in line with the Bank of England’s latest survey on business conditions released last week. However, the manufacturing sector is expected to remain relatively strong this year on the back of strong global growth and trade.
This morning the pound traded slightly higher against the dollar and the euro ahead of the PMI figures.
Key economic data this week will include US non-farm payrolls on Friday, expected to show 185,000 jobs in March after better-than-expected numbers in February. Overall unemployment is expected to have fallen to 4.0% in March from 4.1% in February. The numbers will be closely watched by the US Federal Reserve which has raised interest rates in March.
Later today Spotify will come to the market offering its shares on the New York Stock Exchange. The company chose a direct listing rather than a traditional initial public offering which means rather than trying to raise money by going public it will make it possible for existing shareholders to sell their shares on the market. This could make for a highly volatile first day of trading because there is no bank to support the stock if it starts falling. Nevertheless a number of analysts have already initiated coverage of the stock with a buy rating expecting that the listing, the first major tech stock listing after Snap Inc.’s nearly a year ago, will attract a lot of investors.