Global markets extend sell-off over tech jitters and rate cut uncertainty

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Global markets slid on Friday as a sell-off in the US spread to Asia, while concerns mounted over high valuations of companies and growing doubts about whether the Federal Reserve would cut interest rates at its next meeting.

The tech-heavy Nasdaq Composite closed 2.3 per cent lower and the S&P 500 lost 1.7 per cent on Thursday in the US over tech jitters from the boom in artificial intelligence.

South Korea’s Kospi slipped 2.6 per cent in early trading and Japan’s tech-heavy Nikkei 225 index dropped 1.6 per cent. Taiwan’s Taiex fell 1.4 per cent. 

China’s CSI 300 fell 0.7 per cent and Hong Kong’s Hang Seng dropped 0.9 per cent. Futures tracking the S&P 500 and Nasdaq 100 rose 0.1 per cent. Futures for the Stoxx Europe 600 index declined 0.3 per cent. 

The sell-off was sharpest in stocks related to AI. SoftBank and SK Hynix fell more than 6 per cent, while Samsung Electronics shed 4 per cent. Taiwan Semiconductor Manufacturing Company dropped 1.8 per cent.

“Investors are becoming more selective of how they think about AI,” said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.

Markets slid as the US government began to reopen after the longest shutdown in history, which put jobs and inflation data on hold.

Stocks rallied at the beginning of the week on news that the shutdown would end, but concerns were mounting over the US job market, said Wee Khoon Chong, a senior strategist at BNY. 

“Markets are jittery,” Chong said. “There’s ongoing concern on where the next job print is going to be.”

In a sign of growing apprehension over the AI rally, Michael Burry, famous for shorting the US housing market during the 2008 financial crisis, announced he would close his hedge fund Scion Asset Management.

“My estimation of value in securities is not now, and has not been for some time, in sync with the markets,” he said in a letter to investors, dated October 27.

On Wednesday Susan Collins, Boston’s Federal Reserve president, cast doubt on a rate cut next month, arguing there was “a relatively high bar for additional easing in the near term”.

Yields on rate-sensitive two-year US Treasuries closed 0.02 percentage points higher on Thursday to 3.59 per cent. Bond yields move inversely to prices.