Stock markets are preparing to undergo a correction on Friday after the cuts made last night by American indices, with technology stocks losing ground and while investors’ hopes of a rate cut in December by the Federal Reserve fade. In this context of pessimism, European stock markets began the day with declines of more than 1.5%.
Asian indices are suffering sharp declines as long-awaited US jobs data failed to provide clarity on the near-term path of interest rates, and investors once again abandoned risky assets despite Nvida’s strong financial results.
Wall Street fell sharply overnight as concerns about inflated prices of technology stocks resurfaced, prompting the Nasdaq’s biggest daily move since April 9, when President Donald Trump’s Liberation Day tariffs rattled markets. At the close, the Nasdaq lost more than 2%.
Data released yesterday showed the US economy created many more jobs than expected in September, but rising unemployment rates and downward revisions to previous months have created uncertainty for the Federal Reserve, which will have to decide whether or not to cut interest rates next month.
Treasury yields fell as futures pointed to a 40% chance of a U.S. rate cut in December, down from 30% the previous day. However, with the next jobs data available only after the Fed meeting, investors remain unconvinced about monetary easing next month.
Thus, pessimism has settled in stock markets around the world, with European stock markets opening the session with declines of more than 1.5%. In the case of the Ibex, this corrective leads it to fall below 15,800 points. “Once again we have observed a rotation from large technology companies (including Nvidia, despite its good results), semiconductors and stocks related to artificial intelligence in general, towards defensive stocks” explain the MacroYield experts. “In addition to underlying concerns about valuations and the AI bubble, economic fear may also have had some impact, despite Walmart’s strong results.” they add.
Chinese stocks are headed for their biggest weekly decline since late December as technology stocks join the global sell-off. The Shanghai Composite Index fell as much as 2.3%, its lowest level since Oct. 17, before paring the loss to 1.9% by the close of the midday session. The CSI 300 index of major companies is also down 1.9%. Both indexes now accumulate a decline of around 3.3% for the week, the worst performance since December 30, 2024, if this trend continues.
The declines are widespread, with technology stocks leading the decline, following a weak session by their US counterparts on Wall Street overnight. In Hong Kong, the benchmark Hang Seng index fell 2.1% to its lowest level in five weeks, and the technology index fell 3.1% to its lowest level in three months.
“Market sentiment weakened towards the end of the year due to lower risk appetite and recent subdued economic data,” Morgan Stanley analysts noted in a report. “The index’s upside potential is modest, with moderate earnings growth and a valuation settling at a higher level,” they add.
For his part, Kyle Rodda, senior analyst at Capital.com, explains that “the markets had many reasons to be optimistic and initially Nvidia’s excellent quarterly results pushed Wall Street towards success. The US employment data was also probably the best expected”. “However, the momentum was not enough to support the recovery, and the fact that two critical risk events were overcome – both with positive results, it should be noted – was not enough to stop the pessimism currently affecting markets,” the expert adds to Reuters.
The Federal Reserve maintains a cautious stance on inflation, as some officials have expressed growing concern about the stability of financial markets, including the possibility of a sharp decline in asset prices. There is debate over when, and even if, interest rates should be cut further.
Cleveland Fed President Beth Hammack warned that cutting rates further at this time poses a wide range of risks to the economy. Fed Governor Lisa Cook foresees the risk of sharp declines in asset prices.
In the currency market, the yen briefly rallied after Japanese Finance Minister Satsuki Katayama said intervention was a chance to address excessive volatility and speculative moves, amid escalating pressure from Tokyo to stem the currency’s fall.
Bank of Japan Governor Kazuo Ueda said a weak yen could affect core inflation. Hours earlier, data showed Japan’s core consumer prices rose 3% in October, keeping alive expectations for a rise in short-term interest rates.
Treasury bonds stabilize after last night’s gains. The two-year Treasury yield was unchanged at 3.554%, after falling 4 basis points overnight, while the 10-year yield was little changed at 4.098%, after falling 3 basis points during the US session.
On the commodity market, oil prices extended last night’s decline as the US government pressured Ukraine to agree to a peace deal with Russia. US West Texas Intermediate crude oil fell 1% to $58.38 and is down 2.8% this week.
The spot price of gold fell 0.2% to $4,069 an ounce, after remaining virtually unchanged overnight.
Meanwhile, bitcoin fell 0.91% to $85,550, its lowest level in seven months.
Stock Markets – Currencies – Debt – Interest Rates – Commodities
