There are a lot of wide-eyed looks on the trading floor today. The bloodbath on Wall Street has washed away all the confidence in European markets. The indiscriminate selling will probably continue until Wall Street finds its first bottom. The FTSE 100 was off its lows of the day half an hour into the trading session, down around 150 points from yesterday’s close. For what is worth, sentiment has improved from overnight pricing which at one point pointing to a 350 point opening loss for the FTSE 100.
There has not been a place to hide in the market today. Every sector on the FTSE 350 is seeing significant losses. Basic Resources and industrials have been amongst the worst performers with utilities down the least, acting as a relative haven. A slump in the oil price has sent shares of BP (LON:BP) down despite some generally healthy fourth quarter results. Profit-taking is a key factor in the minds of investors. It’s clear to see in the reaction to Ocado's (LON:OCDO) earnings update that on a bad day in the market and after a big run up in the share price, investors are pulling out profits while they can.
Note from Friday Feb 2: Difficult week tees up bigger stock market correction
The market has reached some new extremes in sentiment during January and certain risk-factors, notably the rise in bond yields, could point to further stock market declines. There’s a good probability, given the extremes in sentiment and concern that the bond market has shifted into a new paradigm, that stock markets experience a 10% pullback sometime in the first quarter. This of course needs to overcome the strong upwards momentum still present in markets.