Global market slide as global tech outage rattles investors

Stock markets slid on Friday after computer systems crashed worldwide, with sentiment also hit by US election uncertainty and Chinese economic worries.

The London Stock Exchange saw a delayed start to trading due to the glitch -- the result of an update with a bug -- which also affected airports, airlines, trains, banks, shops and even doctors' appointments.

Later, the calculation of London's blue-chip FTSE 100 index was frozen during part of the afternoon, as was the main index for the LSE-owned Milan stock exchange. Trading in stocks was unaffected.

"Risk aversion is taking hold yet again, with news that banks, airports, train companies, TV stations including Sky News, stock exchanges including the LSE, Microsoft's cloud services and cyber security services have all been hit by major online outages," said Kathleen Brooks, research director at XTB.

The crash was caused by an update of CrowdStrike antivirus software on Microsoft's cloud computing service.

Shares in CrowdStrike, which has already issued a software fix, tumbled 14.2 per cent but recovered part of the loss during morning trading.

Microsoft's shares were down 0.7 per cent approaching midday.

Wall Street's main stock indices tried to push higher in morning trading but failed to hold onto gains.

European shares closed lower across the board, as did most Asian markets.

"A global IT outage led to risk off sentiment," said Axel Rudolph, senior market analyst at online trading platform IG.

Aviation officials in the United States briefly grounded all planes and airlines elsewhere cancelled or delayed flights, as systems running Microsoft Windows crashed.

"The world grinding to a halt because of a global IT meltdown shows the dark side to technology and that relying on computers does not always make life easier," noted Dan Coatsworth, investment analyst at stockbroker AJ Bell.

Prior to the news, investors were already on edge after a report said the White House was considering a crackdown on firms supplying chip technology to Beijing.

They were also nervous after Donald Trump's call for Taiwan to pay Washington for help defending itself against China.

Markets have been enjoying a healthy run-up as Federal Reserve officials have lined up in recent days to suggest they are ready to begin reducing rates.

However, the tech sector -- which has led the surge in stocks this year -- has taken a hefty hit after the report of the White House's warning over supplying China and Trump's remarks about Taiwan, home to some of the world's biggest chip producers.

The tech stock rally has also resulted in excessive valuations, according to many analysts, but investors are apparently mostly shifting into other sectors rather than pulling money from the equity market.

But the broadest US stock market index, the Russell 2000, also fell sharply on Thursday.

"It appeared that investors were happier taking some profits following the week-long rotation out of tech and into value, than adding to their exposure," said David Morrison, senior market analyst at Trade Nation.

Patrick O'Hare at Briefing.com said: "Market participants will be watching today's price action closely to see if there is a buy-the-dip inclination or a continued bid to take some money off the table." There is also growing uncertainty over who will run against Trump in November, as calls for President Joe Biden to step aside continue to grow owing to questions about his health.

A spokesperson for FTSE Russell, which is part of LSEG, said that they were experiencing an impact to real-time platforms, "which is preventing clients from accessing and receiving data" and affecting its indices.

The European Energy Exchange said in a statement on its website that clients using the Trayport power and gas trading platform were having problems trading "due to infrastructure issues with third-party service provider".

At least six trading sources at oil majors Shell and BP as well as trading house Vitol said operations were affected. BP and Shell did not immediately respond to requests for comments.

Vitol said core trading operations were functioning well though some individual computers and some processes that interface with third party systems were impacted temporarily.

"Friday's global tech outage is an example of an unforeseen event that market participants always fear, but don't frequently think about," said Glen Smith, chief investment officer at GDS Wealth Management.

By the start of US business, normality was returning.

The New York Stock Exchange and Nasdaq said markets were operational and working normally.

Major US banks including Bank of America and Goldman Sachs said they had not seen any major impact on their systems or operations. Citigroup has also not been affected, a source familiar with the matter said.

While there were no confirmed reports of trading difficulties as a result of the outage, some traders earlier said there were signs of disruption at smaller financial institutions.

One London-based trader said several multilateral trading facilities were affected, leaving some clients unable to trade.

Some banks and financial services firms said employees and customers had problems accessing their systems.

"People can't switch their computers on after restarts. Those who didn't restart are doing fine," another trader said.

Schwab had a posting on its website saying: "Due to a third-party, global, industry-wide issue, certain online functionality may be intermittently slow or unavailable. We’re actively monitoring the issue. Phone services may be disrupted and hold times may be longer than usual."

Schwab did not immediately respond to a request for comment.

Barclays reported customers were unable to manage accounts on its digital investing platform Smart Investor. Germany's Allianz said the outage affected the ability of employees to log on to their computers. Banks in South Africa also reported disruptions.

A spokesperson at the Financial Services Information Sharing and Analysis Center (FS-ISAC) said the outages had not had a systemic impact on the financial services industry.

"Core functions, including banking and payment processing, are largely functioning with some scattered effects," the spokesperson said.

Fitch said the latest event would likely increase regulatory scrutiny on IT providers.

"Financial institutions' dependencies on third parties has grown in recent years as part of the ongoing digitalisation of the sector," said Monsur Hussain, Head of Financial Institutions Research at Fitch.

"The economies of scale are compelling, but they can also bring systemic risks."

Meanwhile, oil slipped on Friday and was set for its second straight weekly loss, as a strong dollar and concern over the economy of top oil importer China offset a tighter supply outlook.

The US dollar index climbed after stronger-than-expected data on the US labour market and manufacturing earlier in the week. A stronger U.S. currency dampens demand for dollar-denominated oil from buyers holding other currencies.

Brent crude prices fell by 83 cents, or 1%, to $84.28 a barrel by 1330 GMT. US West Texas Intermediate crude futures slipped 63 cents, or 0.8%, to $82.19.

A lack of concrete stimulus measures from top oil importer China has also weighed on commodities, ANZ analysts wrote.

Chinese officials acknowledged on Friday the sweeping list of economic goals re-emphasised at the end of a key Communist Party meeting this week contained "many complex contradictions", pointing to a bumpy road ahead for policy implementation.

China's economy grew by a slower-than-expected 4.7% in the second quarter, official data showed, sparking concerns over its demand for oil.

A global tech outage on Friday disrupted operations in multiple industries, with airlines halting flights, some broadcasters going off-air and everything from banking to healthcare hit by system problems.

LSEG Group's data and services were back up and running on Friday after an outage caused some disruption across financial markets earlier in the day. Reuters provides news for LSEG's Workspace platform.

Meanwhile, two large oil tankers were on fire after colliding in waters near Singapore, the world's biggest refuelling port, with two crew members airlifted to hospital and others rescued from life rafts, authorities and one of the companies said.

Oil prices found some support in the previous two sessions after the US government reported a bigger-than-expected weekly decline in oil stockpiles.

Agencies