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AI oversight fears rattle global stocks

Fears that a Democratic-controlled Congress could impose tougher rules on artificial intelligence (AI) sent Wall Street sharply lower on Thursday, while European shares also retreated. The selling spread across Asia on Friday, with Japanese and South Korean equities particularly hard hit as investors questioned the outlook for AI-related spending. Bitcoin also suffered heavy losses. Separately, the Bank of England raised borrowing costs on Thursday to counter inflationary pressure from disrupted energy supplies. Attention now turns to Friday’s US labour market report for fresh signals on the economy’s resilience.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

Negative market data
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US stocks plunge on AI regulation fears

The Nasdaq-100 fell 6.4% to 26,629.81 points on Thursday as concerns about tighter AI regulation triggered a US technology sell-off, erasing USD 2.3 trillion in market value and causing the VIX to surge 69.7% to 28.18. The S&P 500 dropped 4.4% to 7353.73 points, its largest daily decline since April last year, while the Dow Jones Industrial Average lost 3.4% to 51,523.06 points. Democratic victories securing control of both chambers of Congress fuelled concerns about restrictions on data-centre construction, potentially weakening demand for chips, while investors shifted into government bonds. Chipmaker Nvidia declined 9.3%, memory-chip producer Micron fell 17.5% and storage-hardware suppliers lost up to 22%. US Treasury yields were largely stable, while bitcoin fell 6.1% to around USD 75,700.

Asian stocks tumble as AI concerns intensify

Japan’s Nikkei 225 fell around 6% and South Korea’s KOSPI dropped 6% on Friday as concerns about AI investment drove a regional technology sell-off. The KOSPI’s earlier decline of 8.8% triggered a 20-minute trading suspension, while the Nikkei stood more than 20% below its June peak, entering bear-market territory. The losses followed Wall Street’s sharpest daily decline in over a year on Thursday, when the S&P 500 fell 4.4%, the Nasdaq Composite lost 5.5% and the Philadelphia Semiconductor Index dropped 12.3%. Weak semiconductor earnings, stretched valuations and uncertainty over returns from AI spending weighed on sentiment, alongside concerns that Democratic gains in the US midterm elections could lead to tighter scrutiny of data-centre projects.

European stocks fall amid technology sell-off

European equities reversed earlier gains on Thursday, with the Euro Stoxx 50 closing 0.3% lower at 6247.85 points. The sharp sell-off in US technology shares spread to Europe as investors feared tighter AI regulation following the Democrats’ US midterm election victory, adding to uncertainty about returns on AI investment. European technology stocks fell 3.2%, with chipmaker STMicroelectronics dropping 9.3% and semiconductor equipment supplier ASML losing 6.6%.

Bank of England raises rates to 4%

The Bank of England increased its benchmark interest rate by 0.25 percentage points to 4% on Thursday, matching market expectations and marking its first rise since 2023. Eight policymakers supported the move and one favoured a larger increase, as the Iran war and disrupted energy supplies pushed UK inflation to 3.5% in September. The bank forecast inflation of around 5% by mid-2027 and upgraded its UK growth projections to 1.6% this year and 1.3% next year, from 1.1% for both years previously. Governor Andrew Bailey indicated that additional increases could be needed if the conflict persists, but stressed that a prolonged tightening cycle was not predetermined.

Swiss unemployment rate holds steady at 3%

Switzerland’s unemployment rate remained at 3% in October, unchanged from September, according to data released by the State Secretariat for Economic Affairs on Thursday. Registered unemployment reached 141,015 people, increasing by 0.4% month-on-month and 4.3% compared with October last year. Adjusted for seasonal effects, however, unemployment declined by 0.9% to 145,949, while the corresponding rate held at 3.1%. Vacancies reported to regional employment offices fell by 8.5% from September to 40,462, although they remained 15.6% above their level a year earlier. The Swiss Market Index closed 0.4% lower at 14,967.73 points on Thursday.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Daimler Truck.

Economic data in focus: German manufacturing production (08:00), French trade balance (08:45), SECO Swiss consumer sentiment (09:00), Swiss foreign currency reserves (09:00), euro-area retail sales (11:00), US nonfarm payrolls (14:30), US unemployment rate (14:30), Canadian unemployment rate (14:30), University of Michigan Consumer Sentiment Index (16:00), Canadian Purchasing Managers’ Index (16:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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