Global share markets experienced a downward trend on Wednesday as investors’ fears regarding a potential US economic slump sparked a sell-off of high worth tech shares; this came on top of losses from the previous trading session.
The S&P 500 in New York saw a decrease of 0.1 per cent, and the Nasdaq Composite Index lost 0.4 per cent. This fall was largely influenced by a 3.1 per cent fall from the US chipmaker Nvidia, following its 9.5 per cent decline on Tuesday.
In Europe, the Stoxx Europe 600 index experienced a 1 per cent fall and the FTSE 100 was down by 0.3 per cent. This followed what was Tuesday’s poorest day for the US markets since the significant sell-off in early August, prompted by disappointing figures on the manufacturing industry’s health.
In Europe, the slump was felt hardest by tech stocks, with the Dutch chip equipment group ASML seeing a significant fall of 6.9 per cent. Similar pressures troubled the Asian markets where the tech and semiconductor sectors bore the brunt, suffering notably severe losses.
The fluctuations in the market were initially triggered by fears of recession due to poor US data, although they also underscored investor nerves regarding high expectations for earnings from tech stocks, particularly in the artificial intelligence sector.
Prashant Bhayani, the Chief Investment Officer at BNP Paribas Wealth Management for Asia, suggested that along with the weaker US data, the dull global economic state was also indicated by the declining prices of cyclical commodities such as oil and copper.
He further stated that there was an element of profit-taking as people return from their August annual breaks. This might be the reason behind the sharp fall of Japan’s Topix which ended down 3.7 per cent with Tokyo Electron, a chipmaker, dropping 8.6 per cent. Hong Kong’s Hang Seng index decreased 1.1 per cent and the Kospi 200 in South Korea ended down 3.2 per cent while Taiwanese chip giant, TSMC, recorded a 5.4 per cent fall.
The chief equity strategist at Nomura, Tomochika Kitaoka, affirmed that the major reason for this downhill trend was due to the US data. He also commented that the market’s global view on tech stocks is uncertain, thus sparking a natural correction process.
The yen experienced uplift, strengthening 0.4 per cent to 144.83 against the dollar, which was propelled by a more hawkish statement on interest rates from Japan’s central bank.
Financial market participants are eagerly awaiting a series of employment-related data announcements in the US this week, which include the much-anticipated publication of the Jolts job openings figures on Wednesday and the all-important payroll numbers on Friday. Market analyst Mohit Kumar from Jefferies, highlighted that current market fluctuations are unlikely to mirror those of early August due to investors’ trimmed positions on riskier assets. However, he anticipates some pre-payroll market nerves while maintaining a marginal preference for riskier assets, albeit with minimized portfolio sizes, despite the recent market changes.
A Bloomberg article stating that the US Department of Justice issued a subpoena to Nvidia, leading to an intensification of its investigation into anti-competitive practices, caused the company’s stock to drop 9.5 per cent on Tuesday. A knowledgeable source confirmed the receipt of the subpoena while the Department of Justice is evaluating if Nvidia misused its influence as the leading AI data centre chips supplier to place competitors at an unfavourable position. Nvidia refuted these allegations, citing their merit-based fortunes evident from their high performing results and customer value. The Department of Justice withheld any commentary on the issue.
The global crude oil market displayed instability following significant downturns on Tuesday. The global standard, Brent, experienced a 0.8 per cent reduction to $73.17 (€66) post its previous 4.9 per cent slump. Its US counterpart, West Texas Intermediate, similarly dropped 0.8 per cent to stand at $69.76.
Simultaneously, additional unstable assets experienced sell-offs. Bitcoin, having experienced a 2.8 per cent decrease to $56,580. Gold, usually considered a safe asset, also recorded a slight 0.1 per cent dip. – Copyright The Financial Times Limited 2024.