A sharp selloff in tech stocks sent a chill through global equity markets and pulled down the dollar yesterday, as crowded bets on data centres and other key AI plays faced a reckoning from high and rising interest rates.
European trading had brought respite of sorts, but with Nasdaq futures pointing more than 1 per cent lower and government bond yields suddenly dropping, the turbulence did not look to be over.
The Nasdaq and the S&P 500 had marked their biggest one-day drop since July on Wednesday, after hotter-than-expected US inflation data fuelled expectations of more Fed rate hikes and all the strains that could bring.
Further denting sentiment yesterday, Taiwan’s TSMC, the world’s largest manufacturer of high-tech chips, struck a note of caution as it posted record profits, on what it described as ‘macroeconomic uncertainties.’
AI lab Anthropic reporting a 45pc surge in third-quarter revenue compared with the previous quarter also failed to lift the spirits.
CoreWeave, a heavily indebted data-centre operator in the eye of the recent AI storm, fell another 6.3pc in premarket trading following a 15pc drop on Wednesday, and Oracle slid 2.1pc after a nearly 9pc drop.
The dollar was down as well in what analysts noted was a departure from its recent patterns.
Europe’s modest equity moves were partly due to the region’s comparatively smaller tech sector, but also as the drop in government bond yields and the price of oil and gas helped ease some of its recent strains.
Asia’s overnight session had been brutal though.
South Korea’s KOSPI index, whose flock of top chipmakers made it one of the main beneficiaries of AI euphoria, plunged almost 8pc in its seventh consecutive drop, while the Nikkei 225 fell 5pc to make it six in a row for Tokyo.
TSMC fell 2pc, despite its record profits. Samsung Electronics plunged nearly 10pc and memory chipmakers SK Hynix and Kioxia Holdings plummeted more than 11pc each.
The lure of safety lifted gold 1pc in London, although it was the sharp move in government bond yields that really stood out given the recent worries that have engulfed them.
Benchmark 10-year US Treasury yields, which move inverse to price, swooped back down towards 5pc in what was their biggest daily drop in more than a year.
New US retail sales data showed they increased more than expected last month, boosted by higher gasoline prices, but they also pointed to spending elsewhere remaining moderate.
Wall Street futures pointed to the stock market turbulence continuing, though. The main US stock markets logged a third straight fall on Wednesday, after US consumer price inflation accelerated by more than expected in September.
Thursday’s Nasdaq futures were another 1.25 per cent lower.
Wednesday’s US inflation data had once again tweaked expectations for the Fed’s rate path, with traders briefly pricing in roughly even odds of a hike this month, before scaling back those bets.
Fed funds futures are now pricing an implied 75pc probability the US central bank will stay on hold at the end of its next two-day meeting on October 28, little changed from the start of the week, according to the CME Group’s FedWatch tool.
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