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FTSE 100 hits one-month low as AI bubble fears rise
Shares are falling faster than wickets in Perth at the start of trading in London, as fears of an AI bubble rip through markets again.
Following losses on Wall Street last night, the FTSE 100 share index has dropped by 104 points, or just over 1%, at the start of trading to 9423 points. That’s a one-month low.
Defence firm Babcock (-4.7%) is leading the fallers, followed by technology investor Polar Capital, then precious metals producers Endeavour Mining (-4.1%) and Fresnillo (-4.5%).
This follows wild trading in the US yesterday, where stocks initially rallied but then fell back as investors digested forecast-beating results from Nvidia and a mixed US jobs report.
Despite Nvidia’s highly anticipated earnings exceeded expectations, concerns persist around the firms using those chips to invest in AI, spending heavily and driving that demand.
“The people who are selling the semiconductors to help power AI doesn’t alleviate the concerns that some of these hyper-scalers are spending way too much money on building the AI infrastructure,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “You have the company that’s benefiting it, but the others are still spending too much money.”
Jim Reid, market strategist at Deutsche Bank, says:
it’s been a truly remarkable 24 hours, with a sequence of moves that were almost impossible to predict….
After the world’s largest company reported spectacular results, the stock was up around +5% by 3pm London time. It closed down -3.15%. The broader market followed a similar pattern: the S&P 500 initially climbed +1.93%, only to fade and close down -1.56% as doubts about AI valuations crept back in. That marked the biggest intra-day swing for the S&P since the six days of extreme market turmoil that followed the Liberation Day tariffs in early April. Adding to the negative backdrop for crypto were lingering questions over the crypto market structure bill that’s being worked on in Congress.
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Bitcoin looking like fool's gold after November slump
There was a fashion, a few years ago, of labelling bitcoin as ‘digital gold’.
It’s looking more like iron pyrite today, though, given its recent slide. Bitcoin is now down by a third from its record high of $126,223 set in early October.
Gold, in contrast, has held up better – it’s around 7% off its record high last month.
Chris Iggo, chair of AXA IM Investment Institute, comments:
Profit taking might be a common theme in risk markets. Not only are equities off their highs (4.6% for the MSCI World, 7.8% for the Nasdaq Composite and 8.5% for the small cap Russell 4000) but gold has lost some of its shine and Bitcoin has undergone what can only be described as a collapse (33% below its recent high price versus the US dollar)
US real wages stagnated in September, new data shows.
The US Labor Department has reported that while there was a nominal increase of 0.2% in average hourly earnings, that was wiped out by inflation.
Real average weekly earnings decreased 0.1 percent over the month due to no change in real average hourly earnings combined with no change in the average workweek, it adds.
Sarah Butler
Asos has turned to online stylists powered by artificial intelligence as it attempts to win back customers and reverse a fall in sales.
The online fashion retailer said sales had fallen 12% in the year to 31 August, and City analysts predicted another year of declining sales ahead.
The company is testing “Styled for You”, which uses AI trained on its database of 100,000 curated outfits to suggest items that could go together with those a shopper has already bought or has searched.
If a shopper signed up to its loyalty programme is seeking advice on buying a dress, for example, the AI stylist on the Asos website may suggest how the item can be complemented with a jacket and heels or given a more casual look with a sweater and trainers.
The choices offered up are picked from Asos ranges based on consumer trends, and the shopper’s history and preferences are expressed when they sign up to its app. Separately, the site already offers suggestions for all shoppers via an automated feed.
Caution is dominating trading across global markets today, reports Bob Savage, head of markets macro strategy at BNY.
He explains:
This is now the worst week for equities since April, and one that has contained the largest inter-day reversal in shares for the NASDAQ on record. Government spending isn’t turning sentiment. Japan’s new PM unveiled $112bn in stimulus, but the country’s equities still fell more than 2.4%. South Korea dropped even further, with the Kospi shedding 3.8%.
The MSCI rebalancing on Monday, with a shift toward tech, isn’t sufficient to redress the situation either. Budgets will remain a key consideration for the market, with the U.K.’s turn next week key for GBP and gilts. If there is to be a reversal of the reversal, rates will be key. Yesterday’s U.S. jobs report for September didn’t help clarify Fed easing expectations for December.
Mexico's economy shrinks in Q3
Mexico’s economy is on the brink of recession after new data showed activity shrank in the last quarter.
Mexican GDP shrank by 0.3% in the July-September quarter, the country’s statistics body reported, a time when trade war uncertainty was hitting growth.
If Mexico’s economy were to suffer a contraction in the fourth-quarter, it would fall into a technical recession.
Investors are feeling somewhat “bewildered” after the u-turn that hit markets yesterday, reports Saxo UK investor strategist Neil Wilson.
Stocks on course for worst week since April, SPX [the S&P 500 share index yesterday] suffers biggest intraday swing since April and Bitcoin at lowest since April...but tariffs are not the issue. Is this the shakeout to clear the decks for seasonal rally starting next week or do we think the technicals are just looking too challenging right now?
Investors are feeling a bit bewildered after a sharp reversal in fortunes in yesterday’s US session. Nvidia had rallied at the open and positive stock futures continued into the cash session to see the S&P 500 up 1.9% at its highs before a sudden switch saw sellers take over. The broad market ended down 1.56% for the day in a 235-pt swing from top to bottom. The Nasdaq saw even greater volatility – erasing a gain of 2.6% to finish the day down 2.15%. April 8 was the last time we’ve seen such a swing. It was, in short, a tough day for bulls and a tough day for the Nvidia-will-save-the-market narrative.
Trading may be calmer on Wall Street when today’s session begins in around two and a half hour’s time.
The futures market indicates the Dow Jones Industrial Average could rise by 0.33%, while the broader S&P 500 index is seen opening flat.
Emerging market stocks have been caught up in the sell-off that began in Wall Street yesterday.
MSCI’s index for emerging market equities has tumbled 2.7%, Reuters reports, putting it on track for its worst week since 7 April, when Donald Trump’s ‘Liberation Day’ tariffs sparked a rout.
Strategist: The stock market has peaked, and a three-year downturn is starting,
One market strategist has warned that the stock market has peaked, and a three-year downturn is starting.
The global liquidity cycle — best described as the flow of funds through world financial markets — is drying up and this is bearish for equities, says a veteran strategist.
“We’ve been in a bit of a bubble and liquidity is basically being pulled away,” said Michael Howell, chief executive of CrossBorder Capital, a London research firm, in an interview with hedge fund manager Erik Townsend on the MacroVoices podcast. He thinks the speculative phase of the U.S. market has peaked, and there’s going to be a downturn for stocks that could last two or three years.
ECB's Christine Lagarde: European growth is linked to ‘disappearing’ world
The president of the European Central Bank has warned that Europe’s economic prosperity is geared towards a disappearing world.
Christine Lagarde told the 35th Frankfurt European Banking Congress this morning that Europe’s economy was vulnerable due to changes it the global economy – such as the fracturing of the post-war global order – that have put strain on its export-led growth model.
As Lagarde put it:
Europe’s vulnerabilities stem from having a growth model geared towards a world that is gradually disappearing.
We embraced globalisation more than any other advanced economy. In the two decades before the pandemic, external trade as a share of GDP almost doubled in the EU, while in the United States it barely moved.
This deep integration brought significant benefits: the number of jobs supported by EU exports rose by 75%, reaching almost 40 million – and for many years, this was a source of resilience.
But today, that same openness has become a vulnerability. Exports have become a far less reliable engine of growth, reflecting the changing global landscape.
