Global Markets Slide on Tech Sell-Off and Economic Jitters
Stock markets across Asia experienced a significant downturn on Friday, mirroring a sharp sell-off on Wall Street. The decline was driven by mounting concerns over the lofty valuations of artificial intelligence (AI) stocks and growing doubts about anticipated interest rate cuts from the US Federal Reserve.
Regional Markets Follow Wall Street's Lead
The sell-off was widespread, with South Korea's Kospi index leading the regional decline, falling 3.2% to 4,038.61. Major tech firms were hit hard, with Samsung Electronics shedding 4.1% and SK Hynix plummeting 6.4%. LG Energy Solutions also gave up 3.7%.
In Japan, the Nikkei 225 fell nearly 1.7% to 50,438.99, reversing gains from the previous session. SoftBank Group led the slide, plunging 5.7% as its technology and AI-related investments suffered losses.
Chinese markets also retreated. Hong Kong's Hang Seng index shed 1.3% to 26,732.99, while the Shanghai Composite slipped nearly 0.2% to 4,022.89. The weakness coincided with fresh data showing China's factory output grew at a 14-month low of 4.9% year-on-year in October, down from 6.5% in September and below analyst expectations.
Wall Street's Worst Day in a Month
The Asian losses came on the heels of a severe tumble for US markets on Thursday. The S&P 500 sank 1.7% to 6,737.49, marking its worst day in a month and pulling further from its recent all-time high. The Dow Jones Industrial Average dropped 1.7% from its record, and the Nasdaq composite, heavily weighted with tech stocks, lost 2.3%.
Chipmaker Nvidia, a bellwether for the AI sector, was a heavy weight on the market, falling 3.6%. Other AI-focused stocks also struggled dramatically. Super Micro Computer dropped 7.4%, Palantir Technologies fell 6.5%, and Broadcom declined 4.3%.
These declines have intensified questions about how much further AI darlings can climb after their spectacular gains this year. For instance, Palantir had gained nearly 174% for the year so far, leading to comparisons with the dot-com bubble of 2000.
Interest Rate Uncertainty Adds to Gloom
Compounding the pressure from the tech sell-off, traders are increasingly worried that the Federal Reserve may not deliver another interest rate cut in December as many had expected. Lower rates typically invigorate the economy and support stock prices.
According to data from CME Group, market expectations for a third rate cut this year have plummeted. Traders now see only a 51.9% chance of a cut, down from nearly 70% just a week ago. This shift in sentiment has undermined one of the key pillars supporting the US market's recent record highs.
In other early Friday trading, oil prices advanced. US benchmark crude added 90 cents to $59.59 per barrel, while Brent crude rose 87 cents to $63.88 per barrel. The US dollar slipped slightly against the Japanese yen.
