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Investors endure considerable volatility in both the US and UK
Thursday 22 Nov 2018 Author: Tom Sieber

Uncertainty and volatility appear to be prevailing on both sides of the Atlantic with any hope of a so-called ‘Santa Rally’ in stocks looking unlikely at present.

The 19 November session saw renewed heavy selling on the US markets in big technology stocks after consumer electronics giant Apple cut production on three of its latest iPhone models amid reports of weaker than expected demand.

This news added to concerns that Apple and peers like Google-owner Alphabet, Amazon and Netflix may struggle to chalk up the levels of future growth required to underpin their lofty valuations.

It is worth noting that fears of over-saturation in the smartphone market are not new and Apple already trades on a significantly lower multiple of earnings than all of the other FAANG stocks.

But this grouping is now down some 20% from its 52-week peak level – putting it in bear market territory.

The US tech sell-off represented a second bout of significant market volatility in a matter of days after UK Prime Minister Theresa May announced a draft Brexit deal (14 Nov) but was then beset by cabinet resignations.

There is considerable scepticism over May’s ability to get any deal through parliament and reports of threats to the agreement from France over fishing rights and, in particular, Spain over the status of Gibraltar are an added headache.

It is little wonder that domestic-facing companies are struggling on the stock market, with the likes of housebuilders, wider real estate businesses and banks all heavily sold off.

Sterling is current holding steady at around $1.285 against the dollar, having traded close to $1.27 in the wake of the resignation of Brexit secretary Dominic Raab on 15 November.

The currency is likely to remain sensitive to the continued machinations over May’s position with a special EU summit looming on 25 November.

Assuming this meeting results in the deal being finalised and formalised from an EU perspective, May faces the nerve-shredding prospect of putting the agreement to a vote of MPs in mid-December. (TS)

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