FTSE 100: UK stocks set to struggle amid US tech sell-off
US tech companies extended losses on Tuesday, with the plunge sending shockwaves across the Atlantic and pushing British blue-chip stocks lower as investors also grow increasingly concerned about the prospect of a no-deal Brexit.
- FTSE 100 under pressure as US tech sell-off resumes
- Nasdaq extends losses, falling 3% on Tuesday
- Investors grow increasingly concerned about prospect of a no-deal Brexit
- Apple given ‘sell’ rating by Goldman Sachs, while Tesla tumbles 15%
US tech companies extended losses on Tuesday, with the plunge putting added pressure on British blue-chips at a time when investors are growing increasingly concerned about the prospect of a no-deal Brexit.
Downward pressure on the pound, as well as a relatively decent showing during corporate earnings season, had initially given the FTSE 100 a boost. But with the Nasdaq sliding more than 8% over the last four trading sessions, the blue-chip index buckled and could struggle over the near-term.
The FTSE 100 closed marginally lower on Tuesday at 5930, with the index struggling to bounce back above 6000 points, suggesting that further losses are on the cards.
Apple share price slides on weak fundamentals
Apple hit an all-time high of $134.18 per share on 1 September, but in the days that followed the stock has tumbled more than 13% as concerns about its fundamentals begin to show.
Revenue growth has slowed overtime and profit margins have been squeezed, leading to a slowdown in profit growth. At the same time, the company, once famous for its high cash reserves, has begun to take on significantly more debt since 2017, with borrowing equalling bond repayments.
As a consequence, analysts at Goldman Sachs have offered a dim outlook for Apple, with the US-based investment bank giving the stock a ‘sell’ rating and issuing a price target of $80, implying a potential downside of -30%.
Apple is trading at $115 per share at the time of publication, with the stock up 54% year-to-date.
Tesla share price slides 28% in six days
The electric car maker has erased more than $76 billion of market value over the last six days after the stock tumbled 28%.
The news will likely come as a shock to many shareholders, with the stock on course for inclusion in the S&P 500 after it delivered quarterly profit for the fourth consecutive time, only for it to be snubbed by the index despite fulfilling all inclusion criteria.
‘With an estimated ~$4.5T of assets indexed to the S&P 500, we think shares were reflecting expectations for substantial passive inflows,’ Baird analyst Ben Kallo wrote in a research note.
‘Unclear why [Tesla] was not included in the recent rebalancing cycle, though we do think the stock will eventually be added to the S&P 500, having fulfilled all inclusion criteria,’ he added.
The spectre of Brexit rears its head
We all knew it would come back at some point. Brexit took a welcome holiday from February, pushed out of the limelight by the Covid-19 crisis, something far more important and far more dramatic, according to Chris Beauchamp, chief market analyst at IG.
‘But as the clock ticks down to the end of the year, and the end of the transition period, the issue has exploded back on to the stage,’ he said.
‘Negotiations have been going on all summer, but without much success, and ongoing frustration with the EU’s approach has resulted in UK Prime Minister Boris Johnson taking a new approach.’
‘In short, ‘no deal’ is firmly back on the agenda, and the government is looking at redrafting some legislation in the event that no agreement is reached by the end of the year,’ he added.
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