The global equity market sell-off calmed this week, even though the predicted bounce back petered out sooner than most had expected with selling pressures already returning mid-week. This left stock markets roughly where they had been the previous Friday, i.e. in a sad state from a 2018 year to date perspective. Average earnings growth of above 20% reported by the first cohort of US and European companies of this earnings season failed to impress equity investors and were regularly greeted with selling rather than buying orders.
The initial sell-off, triggered by concerns that a bond market riot may be brewing because of normalising yield levels has turned stock market pundits away from the positive US and global growth narrative to look for other reasons with which to rationalise their sudden risk-off stance. And once they are looking they can find far more than just Donald Trump’s trade war poker games: Saudi Arabia threatening with an oil shock; Brexit routes becoming so confusing and ever changing that all sides seem to be screaming ‘No!’ in unison; Italy provoking the bond markets by submitting budget proposals they know are unacceptable for the EU and Eurozone and perhaps most importantly Chinese stock markets suffering a bigger than -20% and accelerating equity bear market.
