UK stock market rocked as investors dump ‘inflated’ technology shares

The UK stock market is taking a tumble as investors continue to off-load shares in technology companies around the world. On Friday, Wall Street saw a mass sell-off in relation to tech-related stocks. That has now caused a knock-on effect in European and Asian markets, with investors following suit.

In total, the so called ‘big five’ US technology firms – Microsoft, Apple, Alphabet, Amazon and Facebook – lost nearly $100 billion on the stock exchange as investors questioned the inflated value of the market. In the past month, Alphabet (Google’s parent company) and Amazon both surpassed the $1,000-per-share mark as the top five all announced record figures for the year thus far. The majority of industry analysts hailed the achievement as reflective of a booming technology sector reaping the rewards of investment. However, some corners were sounding alarm bells that the valuation was becoming too big to sustain. Mad Money host Jim Cramer went so far as to compare the ‘$1,000 per share red flag’ to the Nifty Fifty of the 1970s that almost caused the entire market to collapse.

Meanwhile, the political uncertainty in the UK is likely to create more instability in the market. As Brexit negotiations are (yet again) thrown into darkness, a number of Channel partners are worried about what impact the general election result will have.

The pound has already sunk due to the political uncertainty, which looks likely to have a damaging effect on a sector that has already been hit hard by Brexit. Prices that have already been inflated due to currency valuation changes will be hit harder. And now the technology sell-off is having an impact on the FTSE 100, with it falling by -0.3% in the last 24 hours. That is largely due to the technology bellwether Nasdaq Composite Index tumbling by -1.8% on Friday.

And things could get worse before they get better, according to industry experts. "The financial markets do not like instability," noted Context’s Jonathan Wagstaff. "The first consequence of the hung parliament has been drops in the FX rate for the pound vs the dollar and euro. Should the new government prove weak and Teresa May is pushed out as leader we would expect these to continue to be adversely hit. If this were to become a trend we may see further vendor price rises in Q3 for the UK, and more stalled deployments from larger enterprise customers."