Global financial markets are facing a sustained selloff, racking up their fourth consecutive day of losses as investor anxiety over technology valuations and the future path of US interest rates takes hold.
Asia-Pacific Leads the Decline
The wave of selling pressure was particularly fierce in the Asia-Pacific region, where stocks tumbled to a one-month low. The broad MSCI index of Asia-Pacific shares outside Japan fell by 1.8%, hitting its lowest point since mid-October.
South Korea's KOSPI index was among the hardest hit, plunging 3.5%, while Hong Kong's Hang Seng dropped 1.9%. In Japan, the Nikkei 225 also endured a brutal session, falling more than 3% amid escalating diplomatic tensions with China concerning Taiwan.
Mounting Pressure from AI and Debt-Fuelled Spending
The negative sentiment spilled over from Wall Street, where the S&P 500 share index closed at its lowest level in a month. European markets were also poised for losses at the open.
Analysts point to a cocktail of concerns driving the rout. Investors are growing increasingly nervous that the US Federal Reserve may not cut interest rates as soon as anticipated, following hawkish commentary from some policymakers.
All eyes are now on the upcoming earnings report from AI giant Nvidia, due on Wednesday night, which is being viewed as a major test for the sector. There is growing unease about the huge sums being committed to artificial intelligence infrastructure, especially as this expansion is increasingly funded by debt.
This worry was underscored by Amazon's announcement of a $15 billion bond sale, its first US dollar bond offering in three years. This follows similar large debt sales by tech peers Meta and Alphabet in recent weeks.
Expert Insight: The Sustainability Question
Michael Brown, a senior research strategist at brokerage Pepperstone, highlighted the shifting mood. "The market has shifted from an 'all capex is good capex' mood, to one where whether firms are actually able to monetise that expenditure has become the million dollar question," he explained.
Brown added that the recent bond sales have "further fuelled concern that AI expansion is now being fuelled by debt, and not by free cash flow, in turn exacerbating jitters over the sustainability of all the spending that we currently see."
The key agenda items for the day include a Treasury Committee hearing on crypto risks at 10am GMT and a speech from the Bank of England's chief economist, Huw Pill, at 1pm GMT in London.
