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AI spending fears drive technology sell-off

Doubts over the returns from heavy AI spending and renewed inflation worries as oil climbed drove sharp losses in US and European technology shares on Thursday, leaving broader equity benchmarks mostly lower. Asian markets showed a more mixed picture on Friday, with gains in China and Hong Kong contrasting with weakness in Japan and South Korea. Japanese inflation picked up, adding to the pressure on local stocks by bolstering expectations of additional rate hikes. US government bonds rallied strongly on Thursday as investors sought shelter from the equity sell-off and mounting fiscal strains in France.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

Falling market
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Asian equities slide as AI concerns deepen

South Korea’s KOSPI fell 0.1% on Friday as concerns about artificial intelligence valuations and financing weighed on Asian equities, while oil prices at five-month highs further dampened risk appetite. Mainland China’s CSI 300 rose 0.9% after entering bear-market territory on Thursday with a decline of more than 20% from its June peak. Chipmaker SK Hynix rose 2.8% despite abandoning plans for a potential US listing of its flash-memory subsidiary Solidigm, while Hong Kong’s Hang Seng gained 1%.

Japan’s core inflation accelerates above target

Japan’s Nikkei 225 fell 0.5% on Friday as technology shares sold off and stronger inflation reinforced expectations of further Bank of Japan interest-rate increases. Annual core inflation, which excludes fresh food, rose to 2.1% in September from 1.7% in August, its highest level this year, while headline inflation also stood at 2.1% and the measure excluding fresh food and energy reached 2.4%. Higher durable goods prices and utility charges contributed to the acceleration, with a weak yen raising import costs and energy-related pressures feeding through indirectly despite government subsidies. The figures strengthen the case for further monetary tightening after the central bank raised its policy rate to 1.25% last month, with underlying inflation again exceeding its 2% target.

US Treasury yields tumble on safe-haven demand

The US ten-year Treasury yield fell 19.8 basis points to 4.951% on Thursday, its lowest close in more than a month, as concerns about artificial intelligence investment and France’s fiscal and political difficulties drove investors towards safer assets. The two-year yield declined 17.5 basis points to 4.648%, while the 30-year yield dropped 15.1 basis points to 5.286%. US yields rebounded only slightly on Friday. French ten-year government bond yields exceeded 5%, reaching a 24-year high, and their spread over German Bunds widened to around 157 basis points as the government struggled to secure spending cuts. Markets expect the Federal Reserve (Fed) and European Central Bank (ECB) to leave interest rates unchanged next week, although expectations of a December ECB increase persist amid energy-driven inflation pressures. The US Dollar Index edged up 0.1% to 101.69, while gold gained 0.1% to around USD 4030 per ounce. Bitcoin fell 1.3% to around USD 81,800.

US technology stocks retreat as oil rises

The Nasdaq 100 fell 2.9% to 28,958.69 points on Thursday as rising oil prices following a drone attack on a Saudi Arabian oilfield fuelled inflation and interest-rate concerns. By Friday, Brent crude oil futures were trading 0.7% higher at USD 113.97 per barrel, while West Texas Intermediate (WTI) futures were up 0.9% at USD 100.32 per barrel. The S&P 500 declined 1.2% to 7663.43 points on Thursday, while the Dow Jones Industrial Average was essentially unchanged at 52,867.98 points. Facebook parent company Meta Platforms lost 7% as plans for further investment, including at least USD 135 billion in artificial intelligence infrastructure this year, heightened concerns about financing requirements and investment returns.

European equities fall as technology stocks slide

The Euro Stoxx 50 declined 2% to 6085.95 points on Thursday as elevated oil prices intensified inflation concerns and technology shares came under pressure following earnings releases from US companies Meta Platforms and Lam Research. Switzerland’s SMI was essentially unchanged at 14,547.97 points, supported by gains in Novartis and Nestlé. Siemens Energy dropped 8.6%, while software group SAP bucked the sector’s decline, rising 3.2% after its quarterly results. Luxury goods group Hermès lost 4.9% amid weakness in China.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from American Express, Eni, Norsk Hydro, and Safran.

Economic data in focus: UK retail sales (08:00), French Purchasing Managers’ Index (09:15), German Purchasing Managers’ Index (09:30), euro-area Purchasing Managers’ Index (10:00), UK Purchasing Managers’ Index (10:30), Bank of Russia interest rate decision (12:30), Canadian retail sales (14:30), US Purchasing Managers’ Index (15:45), University of Michigan Consumer Sentiment 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.