Risk-off sentiment grips global markets as we head towards the end of the year, says our head of investment Victoria Scholar.
After miners and banks pushed the FTSE 100 into the green yesterday, European markets have opened lower. Most FTSE 100 stocks are in the red with only a handful of names, including Homeserve (LSE:HSV) and United Utilities Group (LSE:UU.), in the green as risk-off sentiment grips global markets as we head towards the end of the year.
More than 120 Russian missiles have targeted major cities across Ukraine prompting air raid alerts across the country this morning. The latest strikes add to dozens of attacks in recent weeks.
US futures are pointing slightly higher after another down day on Wall Street with the major averages all closing lower by more than 1% with the tech-heavy Nasdaq leading the declines. Ongoing worries about the performance of big tech, fears of a recession, rising interest rates and China’s complex Covid situation are weighing on financial markets.
The US has joined India, Italy, Japan and Taiwan in requiring Covid tests for travellers from China. According to the Telegraph newspaper, the UK is also considering following suit. It comes as China simultaneously battles a surge in coronavirus infections, while attempting to dismantle its longstanding zero-tolerance to Covid approach. It is also grappling with low vaccination rates particularly among the elderly and the lack of official data available to measure the seriousness of the outbreaks. Markets in Asia are under pressure with the Hang Seng down more than 1% amid concerns about the impact of Covid on demand in China. This is also dragging oil prices into the red with Brent crude down by almost 1%.
Ferrexpo (LSE:FXPO)’s owner Kostyantyn Zhevago has reportedly been arrested in Courchevel in the French Alps at the request of Ukraine. He will stand in front of the appeals court of Chambery in France on 5 January. The billionaire is wanted on suspicion of financial crimes including money laundering linked to the bankrupt Finance & Credit Bank. The Ukraine-focused iron pellet producer commented this morning that it is aware that Mr Zhevago has been detained in France and it will seek to clarify the situation and update the market as appropriate.
Ferrexpo has had a difficult year with shares down around 45% year-to-date as the war in Ukraine caused major interruptions and instability, which have impacted its operations and production. In October, a Russian missile struck nearby infrastructure leaving Ferrexpo with minimal power supply.
Elon Musk has tried to reassure staff at Tesla Inc (NASDAQ:TSLA) via email after shares plunged double-digits on Tuesday, leaving the stock down more than 70% so far this year. He told staff not to be bothered by the “stock market craziness”. He said “as we demonstrate continued excellent performance, the market will recognise that”. Musk also said: “Long-term, I believe very much that Tesla will be the most valuable company on Earth.” Worries about slowing demand in China and reports of reduced production at its Shanghai factory next year added to the maelstrom facing the stock this year.
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Tesla has lost more than half of its value since the start of October, as investors lose faith in Musk’s leadership amid concerns he is taking his eye off the ball with the Twitter distraction. Musk’s decision to selling billions of dollars’ worth of shares in Tesla this year didn’t help investor confidence either. More broadly Tesla has been caught up in the big tech sell-off as investor appetite for growth stocks diminishes amid the rising interest rate and inflationary backdrop.
Exxon Mobil Corp (NYSE:XOM) is suing the European Union over its windfall tax on oil companies arguing the levy is ‘counter-productive’. The oil giant said it could cost the business $2 billion by the end of next year and suggested that it could lead to lower investment in Europe and reduced energy supply. Brussels imposed taxes on the sector this year after the war in Ukraine sent commodity prices soaring, resulting in record profits for the oil giants, which felt uncomfortable at a time when individuals and households have been, and still are, struggling with the cost-of-living crisis.
Amid the volatile equity market backdrop, Exxon Mobil has been a standout stock market winner this year, surging more than 70% as Europe looks to diversify away from Russian fuel. Both Exxon and Chevron Corp (NYSE:CVX) have posted record quarterly profits this year thanks to strong commodity prices. However, profits are now easing off from their all-time highs as oil prices and margins soften.
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