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US tech gloom triggers Monday blues

LiveMint logoLiveMint 12-06-2017 Ami Shah

Friday’s gloom in US markets, triggered by a sell-off in technology shares, engulfed Asian stocks on Monday and Indian shares were no exception, as global investors turned wary of risk. The mood was also cautious ahead of the US Federal Reserve’s two-day policy meeting on Tuesday and Wednesday.

US equities tumbled on Friday after Robert Boroujerdi, global chief investment officer at Goldman Sachs Group Inc., warned that low volatility in shares of Facebook Inc., Amazon.com Inc., Apple Inc, Microsoft Corp. and Google parent Alphabet Inc. may be blinding investors to risks such as cyclicality and regulation, according to a Bloomberg report. There were concerns that the situation was similar to the tech bubble that burst in 1999-2000. These five companies—for which Goldman Sachs has coined the acronym FAAMG—erased a collective $97.4 billion from their market value. In reaction, the S&P 500 Information Technology Sector GICS Level 1 Index tumbled 2.7%.

The negative sentiment spread to Asian and European stocks when trading opened on Monday. Hong Kong’s Hang Seng index fell 1.24% and Japan’s Nikkei index shed 0.52%. India, too, was not immune. If anything, this was a good excuse for the market to consolidate after repeatedly hitting new highs in the past few weeks. Key equity indices closed lower on Monday as global sentiment weighed. The Nifty breached 9,600 points before closing at 9,616.4 points, 0.49% lower.

The sell-off impacted tech stocks across Asia, particularly rivals to the FAAMG grouping. It also hurt suppliers to them such as Samsung Electronics Co. Ltd and STMicro Electronics MV. High valuations weigh on these stocks as well. In the days ahead, the US Federal Reserve’s Federal Open Market Committee meeting will set the tone for markets. The US central bank is widely expected to hike interest rates by 25 basis points. One basis point is one-hundredth of a percentage point.

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