Global Markets in Freefall: What's Behind the Sharp Drop?
European Markets Face Challenges
European markets started the week on a negative note, with significant declines observed as investors reevaluated their expectations for interest-rate cuts and questioned the high valuations of leading US technology and AI stocks. This downturn followed a retreat in Asian shares and a drop in Wall Street on Thursday.
Dan Coatsworth, head of markets at AJ Bell, noted that "markets are down across the board as investors fret about cracks in the narrative that’s driven the mother of all tech rallies over the past few years." The main concern is about "rich equity valuations and how billions of dollars are being spent on AI just at a time when the jobs market is looking fragile," he added.
In the UK, government bond yields rose following reports that Chancellor Rachel Reeves had abandoned plans to increase income tax rates in the Autumn Budget. The ten-year gilt yield climbed above 4.54% before easing slightly. If confirmed, this move would create a shortfall in public finances.
London equities faced pressure, with bank shares among the worst performers on the FTSE 100 as investors considered the implications of a tighter fiscal environment.
By around 11:00 CET, the FTSE 100 was down more than 1.1%, the European benchmark Stoxx 600 had lost nearly 1%, the DAX in Frankfurt dipped more than 0.7%, and the CAC 40 in Paris fell nearly 0.7%. The Madrid and Milan indexes were down 1.2% and 1% respectively.
Despite the gloom, Coatsworth pointed out that "the scale of the market pullback wasn’t severe enough to suggest widespread panic." He added that "a 1% decline in the FTSE 100 is not out of the ordinary for a one-day movement when markets are feeling grumpy."
Corporate News and Market Movements
On the corporate front, luxury group Richemont saw strong performance, with shares rising 7.5% after beating forecast first-half results. Siemens Energy also performed well, jumping more than 10% after raising its targets for the 2028 financial year. In other news, French Ubisoft delayed its financial report for the past six months, and trading in its shares was suspended after an earlier drop of more than 8%.
Across the Atlantic, Wall Street experienced one of its weakest sessions since April on Thursday, with the S&P 500 sliding 1.7% and the Dow Jones Industrial Average falling 1.7% from its record high set a day earlier. The tech-heavy Nasdaq dropped 2.3%.
Shares in major AI-linked companies faced heavy selling pressure, with Nvidia down 3.6%, Super Micro Computer off 7.4%, Palantir falling 6.5%, and Broadcom losing 4.3%. Oracle lost more than 4%.
The sector's extraordinary gains this year have prompted comparisons with the dot-com boom, fueling doubts about how much further prices can rise.
Expectations for a further US interest-rate cut in December have also diminished, with market pricing now suggesting only a marginal chance the Federal Reserve will move again this year.
Asian Markets Reflect Global Trends
Asian markets mirrored the global downturn as fresh data showed China’s factory output grew at its slowest pace in 14 months in October, rising 4.9% year on year — down from 6.5% in September and missing expectations. Fixed-asset investment also weakened, dragged down by ongoing softness in the property sector.
South Korea’s Kospi led regional losses, tumbling 3.8% amid heavy selling of technology shares. Samsung Electronics dropped 5.5%, SK Hynix slid 8.5%, and LG Energy Solution lost 4.4%. Taiwan’s Taiex declined 1.8%.
Japan’s Nikkei 225 shed nearly 1.8%, reversing Thursday’s gains, with SoftBank Group plunging 6.6%. In China, Hong Kong’s Hang Seng fell 2%, and the Shanghai Composite slipped 1%.
Oil Prices and Currency Movements
Meanwhile, oil prices strengthened. Brent crude rose nearly 1.6% to $63.99 a barrel, and West Texas Intermediate added 1.8% to $59.76. The dollar was slightly firmer at ¥154.55, while the euro traded at $1.1637.
