Weakening FANG Stocks Stir Overnight Volatility in U.S. Futures

(Bloomberg) -- A steady weakening in U.S. equity futures snowballed into one of the biggest drops in a month for Nasdaq 100 contracts, as pre-market trading revealed losses of around 1.5 percent in Apple Inc., Facebook Inc., Alphabet and Amazon.com.

Facebook was in the spotlight as government officials in the U.S. and Europe were demanding answers from the company after reports that Cambridge Analytica, the advertising-data firm that helped Donald Trump win the U.S. presidency, retained information on tens of millions of Facebook users without their consent. Apple suppliers including Samsung and LG Display fell in Asia as the iPhone maker was said to be producing its own displays for the first time.

“The newsflow on Facebook has sparked a risk-off move on the tech sector, coupled with worries over Apple suppliers,” Andrea Tueni, head of sales trading at Saxo Banque France, said by phone. “And all this happens on a week where we have a crucial Fed meeting, so people are tempted to move to the sidelines.”

While global stocks have bounced back from their February lows, the backdrop for equities remains far from placid. Investor anxiety, effectively nonexistent for two years as central banks flooded markets with liquidity, sits about 70 percent above its levels in January, going by the Cboe Volatility Index. Corporate credit is also showing cracks, with an exchange-traded fund tracking U.S. junk bonds down in seven of the last 10 weeks.

Futures for the S&P 500 were down 0.5 percent at 5:30 a.m. in New York, for the Dow Jones Industrial Average down 0.6 percent and for the Nasdaq 100 down 1.2 percent. The VIX surged 7.1 percent to 16.9, showing a rise in investor anxiety ahead of the Federal Reserve’s meeting on Wednesday.

Investors this week turn their focus on the first U.S. interest rate decision under the Fed’s new Chairman Jerome Powell after he hinted that he’s open to lifting the policy rate four times this year. Some Wall Street banks such as Goldman Sachs Group Inc. expect the median projection to rise to four on Wednesday.

“It’s the fear of the Fed hike and signs of more hikes that’s driving the market,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “Also, there’s negative sentiment due to President Trump being so stubborn, not listening to his advisers, but still there’s little volume. The dive in Europe’s indexes shows that expiry was the main driver for the recent recovery.”

Hao Hong, chief strategist at Bocom International Holdings Co., also said that concern is Fed-related. “The interest-rate outlook is changing soon and the probability that the Fed raises interest rates is almost certain,” he said by phone.

POLITICS:

• G-20 finance ministers and central bank governors meet in Buenos Aires, through March 20.
• Treasury official David Malpass said in Buenos Aires that he misspoke after claiming the U.S. was pulling out of decade-old formal economic talks with Beijing. There hasn’t been a decision made on the future of such discussions, he said.
• President Trump attacked Robert Mueller’s probe into Russian election meddling and escalated his assault on the FBI in the latest sign of a possible showdown
• Russian President Vladimir Putin won a landslide victory in a tightly controlled election and claimed a renewed mandate for his escalating confrontation with the West.

ECONOMY:

• ECB Governing Council members Klaas Knot and Francois Villeroy de Galhau told global investors in Argentina that they’re right to bet on a gradual reduction of monetary stimulus in the euro area.
• Investors are also assessing the implications of a new head at China’s central bank

EARNINGS:

• Companies reporting earnings include Oracle

--With assistance from Ksenia Galouchko Divya Balji and Livia Yap

To contact the reporters on this story: Blaise Robinson in Paris at brobinson58@bloomberg.net, Gabriella Lovas in Budapest at glovas2@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis

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