Selloff stabilising in Europe after Dow’s record losses

European bourses have dropped sharply on the open, as casualties from the selloff in equities mount up. Taking the lead from the US, where the Dow Jones recorded the biggest point fall in a single trading session of 1,175 points of 4.6% overnight, the FTSE and the DAX opened over 2.5% lower, although are quickly paring losses. 

Whilst there was no single event which prompted Monday’s sell off, fears over rising interest rates dampening economic growth and the fact that the market is long due a correction, have been weighing on sentiment. The first signs falling confidence and investors have been surprisingly quick to sell out and book profits from the phenomenal rally over the past few months. 

The last two sessions have seen the Dow wipe out 8.5%, all of the gains from January. Corrections are considered a healthy part of market dynamics; however, the size of this correction and the speed of the selloff have certainly served as a cautionary reminder to investors that the market doesn’t just go up in a straight line, which is pretty much what it has been doing in this latest stage of the bull market. 

Selloff stabilising 

Moving through the morning and the bloodbath appears to be stabilising, with indices across Europe showing signs of trying to move higher. US futures are in fact pointing to a mixed start in the US this afternoon, with the Dow Jones and the S&P still clearly in negative territory, although the Nasdaq in pushing back into positive ground. 

Traders are not panicking, the speed of the selloff implies that it won’t be able to hold out for an extended period of time. Whilst few have proved willing to catch a falling knife, on confirmed signs of a turnaround, investors could start to see this an epic buying opportunity; fundamentals are still strong. 

GBP/USD remains sub $1.40 

Despite the weaker dollar, GBP/USD has not been able to move back above $1.40. A triple whammy of weak PMI data and Brexit concerns mean any advance in the pound has been tentative. 

With no high impacting data on the UK economic calendar today, investors will turn their attention to the US for the trade balance and JOLTS jobs openings. Bitcoin below $6000 Equities haven’t been the only assets to plummet in recent sessions. Bitcoin continued to tumble on Tuesday, briefly breaking below $6000, its lowest level since mid-November. 

Bitcoin has now lost over 50% of its value so far this year, with the latest bout of selling coming amid increased concerns over increased regulation, hackers and potentially price manipulation. The bubble here seems to have burst, the question now is how low will it go?