Global markets took a hit on Wednesday as concerns over the world’s largest economy deepened, following subdued US manufacturing data and significant losses in the tech sector.
UK shares opened lower, following drops in Asian and US markets. By midday, the FTSE 100 index had fallen by 0.55%, reflecting a broader downward trend in Europe. Germany’s Dax fell by 1.41%, France’s Cac 40 was down almost 1%, and Spain’s Ibex was lower by 0.51%.
The decline comes amid growing uncertainty about the US economy, with investors focusing on upcoming jobs data set to be released on Friday. Market watchers are particularly interested in how the Federal Reserve, the US central bank, will respond when it meets to discuss interest rates next week.
“Growth concerns are dominating market moves,” said Julia Lee of FTSE Russell in an interview with BBC.
Nvidia and Tech Sector Slump
The tech-heavy Nasdaq fell by over 3% on Tuesday, and American chip giant Nvidia was hit particularly hard, dropping by 9.5%. This wiped nearly $279 billion (£212.9 billion) off its stock market valuation, driven by dampened optimism about the artificial intelligence (AI) boom. Despite a sharp drop, Nvidia’s stock is still worth double its value from a year ago, with shares riding a wave of excitement surrounding AI developments.
Some analysts saw Nvidia’s recent fall as an adjustment. Swetha Ramachandran, fund manager at Artemis Investment Management, remarked that Nvidia’s losses were the result of “expectations catching up with reality.” the company had reported strong second-quarter growth of 122%, but it has since forecast an expected deceleration to 80% growth in the upcoming third quarter.
Other US tech giants, including Alphabet, Apple, and Microsoft, also saw significant declines on Tuesday, contributing to a broader slump in US markets.
Asian Markets Feel Impact
The negative sentiment from the US spilled over into Asian markets, with Japan’s Nikkei 225 dropping 4.2%, South Korea’s Kospi falling more than 3%, and Hong Kong’s Hang Seng index down 1.1%. Key technology companies across Asia, including TSMC, Samsung Electronics, SK Hynix, and Tokyo Electron, also saw sharp declines as concerns about global growth mounted.
Julia Lee noted that exporting countries in Asia were particularly hard-hit, saying, “Concerns around global growth look to be hitting exporting countries in region particularly hard.”
While Japan’s Nikkei has risen 12% over the past year, indexes in Shanghai and Hong Kong have experienced declines, highlighting the uneven performance of Asian markets.
Looking Ahead: Interest Rates and Jobs Data
Investors are now keenly watching for the US Federal Reserve’s next move, with the central bank meeting next week to discuss potential changes to interest rates. Friday’s jobs report is also expected to provide more clues about the trajectory of the US economy.
Swetha Ramachandran from Artemis Investment noted that recent market volatility may reflect waning confidence that the Federal Reserve will make significant cuts to interest rates shortly.
In addition to concerns about slowing growth, Nvidia’s slide was partly fueled by speculation over a subpoena from the US Department of Justice regarding anti-trust issues. However, Nvidia later clarified that no such subpoena had been issued.