POSTED BY ANGUS GEDDES
US equity markets were moderately lower on Thursday with the Tech sector leading the way on the downside as the S&P500 lost around 0.22%, while the Dow Jones closed virtually flat. Technology stocks were weaker with the Nasdaq trading 0.47% lower at 6,165. The selloff was at its most intense during the open with many Tech names including Baidu, Alphabet, Facebook, NVidia and Netflix staging reversals intraday and rallying well off the lows into the close. Time will tell but we may well have seen the end of the acute phase of the Tech sector correction.
The Nasdaq staged a decent intraday reversal as buyers entered the market.
In the UK, the news continues to be dominated by the dreadful fire that quickly consumed and engulfed the 1970s Grenfell Tower that has led to the deaths of scores of people. This event is going to have significant repercussions for London and the wider UK for decades to come. Having invested in many older commercial and residential buildings, the standards in Australia are somewhat higher. Sprinkler systems for example are compulsory with no exceptions.
What we will see is a clamp down by authorities in the UK, and in some cases I expect some buildings to be given demolition orders if they fail to comply within a certain time frame. This could change the landscape of London and boost some of the property companies. The sad events at the Grenfell Tower are a dismal reminder of bumbling local governments and complacent body corporates.
I have yet to read in the media what the ownership structure was for the Grenfell Tower, but serious questions are going to be asked of the landlord and or the body corporate which will have significant repercussions for many other similar tower structures built in the UK and London, especially, during the 1960s and 1970s. Failure to comply with the highest standards renders these buildings as nothing more than “death traps”.
The FTSE 100 declined by 0.74% to 7,419 while the domestically focused FTSE 250 was off 2.1% at 19,553. Precious metal miners dragged the blue chip index down with Fresnillo off 7% and Randgold off 5%. I see the correction in precious metals stocks as a buying opportunity, particularly in the UK where downside currency risk in sterling is going to continue for some time.