Asian and US markets closed lower overnight, undoing the marginal gains that had been seen at the start of the week. Traders are still looking with fear at the prospect of a US-China trade war - something that led to sharp falls in shares late last week. But there does appear to be other factors at play in this latest decline.
"A theme that was expected throughout 2018 was volatility shocks and spikes in volatility," said Ryan McGrath, head of fixed income at Cantor Fitzgerald. "I think when you have such a crowded trade in equity markets, where equity markets were up in excess of 20% in 2017 the markets are incentivised to take some profit."
Mr McGrath said traders are essentially now looking for reasons to sell shares - such as the planned US tariffs on Chinese goods or concerns around the data practices of some tech firms. That does not mean, however, that price falls are inevitable this year - but that more volatility in share prices should be expected in the months ahead. That volatility has been particularly pronounced in the area of tech shares this week - with Facebook again losing value following reports around the way some of its user data was mis-handled.
Traders are concerned about tighter regulation limiting the amount of money Facebook can make from data-backed adverts - but they are also worried about the threat of users and advertisers abandoning the platform due to its declining reputation. "Certainly there's fears over what may come out if Mark Zuckerberg is forced to testify in front of the US Congress, there could be additional information that's not in the public domain at the moment," he said. "Increased regulation is a possibility in the sector and obviously companies like Facebook are hugely dependent on advertising revenue; if the advertisers turn their back on the stock it could turn into an earnings problem."
Other tech firms have also been badly hit in recent days - with companies connected to artificial intelligence also suffering of late. That is partly due to some negative developments for the sector - including a fatal road crash in Arizona involving a driverless car. That has hit firms like Nvidia - which makes chips for driverless cars - as well as Tesla which has invested heavily in the technology. "Where you're looking at the likes of Facebook and Twitter getting hit and when the likes of Amazon or Microsoft look quite expensive on a valuation basis, I think that is what would incentivise investors to come in and take profits," Mr McGrath said.
In Ireland the hot stock at the moment is Smurfit Kappa, which earlier this week rejected a second takeover bid from International Paper. Smurfit Kappa did so as the company felt the offer did not reflect its intrinsic value. Mr McGrath said he feels there is room for its potential suitor to come back with something that might be closer to what's acceptable. "I think it's likely that International Paper will come back with a third bid," he said. "There does seem to be a difference between the intrinsic value that management at Smurfit have put on the company and what International Paper have offered. "You would need something closer to that €40 a share mark to really engage the management in Smurfit Kappa, so I would look for that to come in the near future," he added.
MORNING BRIEFS - Facebook shares shed almost 5% of their value last night, as concerns around its handling of user data continued to take its toll. The company's value has fallen by 17.7% since March 16, wiping about $95 billion off its market capitalisation. Other firms reliant on user data have also been badly affected, with Twitter shares down 12% last night and more than 23% in the past two weeks. Shares in Google owner Alphabet were down 4.5% last night and are 13.6% lower since the middle of the month.
*** Bookmaker Paddy Power Betfair has announced Jonathan Hill as its new chief financial officer. Mr Hill currently holds the same role at over-50s insurance firm Saga, and will move to Paddy Power Betfair in the Autumn.