Global technology stocks fell on Wednesday as expectations of economies avoiding major disruptions from the Omicron coronavirus strain and central banks raising rates hit groups that flourished during the pandemic.
In Asia, Hong Kong’s Hang Seng index fell 1.6 percent, with its technology sub-sector down 4.6 percent. It was the worst drop for tech stocks traded in the city since July.
The resounding move falls overnight on Wall Street, with the FANG + index of major tech groups including Apple, Amazon and Tesla losing 1.7 percent.
Europe’s Stoxx 600 stock index was flat in early trades, with companies in its relatively small technology sub-sector falling to the bottom of its leaderboard. The Dutch consumer internet group Prosus fell by 3.4 percent while the German software provider SAP fell by 0.8 percent.
Futures that tracked Wall Street’s technology-focused Nasdaq 100 stock index fell 0.3 percent in early trades.
Sales in technology stocks came as investors focused on it early dates suggesting that the highly transmissible Omicron coronavirus variant would be less likely than previous strains to lead to hospitalizations and thus widespread restrictions.
“The Omicron variant looks rather soft, with increasing cases not leading to higher deaths, raising hopes that the end of the pandemic is in sight,” said Emmanuel Cau, head of European equities strategy at Barclays.
This optimism boosted shares of so-called cyclical companies, companies whose fortunes are closely linked to economic trends such as banks and energy producers, this week.
Traders have also retreated from U.S. treasuries, the haven assets that are favored in times of economic uncertainty, but which tend to fall in price when expectations of higher interest rates diminish the relative attractiveness of their fixed-income payments.
Officials at the US Federal Reserve, ending its monetary stimulus from the pandemic era, expect the central bank to raise interest rates three times this year, according to projections published late last year.
Yields on the benchmark for 10-year U.S. treasury, which is reversing the price of debt, fell 0.02 percentage points lower to 1.646 percent on Wednesday, but climbed from about 1.5 percent on Dec. 31.
Components of the FANG + index have been one of the biggest publicly traded winners of the pandemic since January 2020, measured by growth in market capitalization in dollar terms, According to A Financial Times study.
While technology groups ‘prospects have been bolstered by constraints and other social constraints, their valuations have also been flattered by ultra-low interest rates that increase the present value of fast-growing companies’ expected future cash flows.
Elsewhere in markets, the UK’s FTSE 100 fell 0.1 per cent after rising 1.6 per cent on Tuesday, thanks to its high concentration of banking, energy and resources businesses. Germany’s Xetra Dax rose 0.3 percent, boosted by consumer and industrial stocks.
Brent crude oil was steady at $ 80.13 a barrel. The oil benchmark dropped to as low as $ 69.28 in late December, suppressed by concerns about Omicron.