European markets are taking a hit today after US tech stocks had their worst day since February 2016 yesterday.
Wall Street's Faangs (Facebook, Apple, Amazon, Netflix and Alphabets Google) were battered yesterday over fears of a regulatory crackdown following Facebook's data scandal. Shares in the social media giant have fallen about 15 per cent this month.
"The overriding concern is that lawmakers and regulators will start to clamp on the use and management of data by the tech giants," said Fiona Cincotta, senior market analyst at City Index.
"Increased regulation could hit advertisers, Facebook's main income source, who could have reduced access to user data and therefore no longer be able to focus advertising in the way that they can at the moment. A hit to this revenue stream could be catastrophic to Facebook.
"There is also the fear than if lawmakers and advertisers are going to clamp down on Facebook, they wont stop there, and this will become an industry wide investigation on lax control," she said.
Michael Hewson, chief market analyst at CMC Markets UK said the as one of the main sectors that has driven stock market gains over the past two years, the tech sector is susceptible to a "major pullback" that could act as a ball and chain for the rest of the equity space.
"With the S&P 500 back at its long term 200-day moving average, and a lot of attention around this key technical level, investors are likely to become ever more nervous of a much sharper sell-off if we drop below 2,580," he said.
Naeem Aslam, chief market analyst at ThinkMarkets, predicted US equity markets could fall another five per cent from yesterday's close.
European tech firms – which mainly consist of chipmakers – followed US stocks lower. Tech stocks led sectoral fallers on the pan-regional Stoxx 600 index this morning.
The UK's blue-chip index was down just 0.26 per cent at 6,981.62 at the time of writing, however, due to London's light listing of tech stocks. Miners were the biggest overall drag on the FTSE today.
Germany's Dax and France's Cac index were both down nearly one per cent at the time of writing.