Global markets took a hit following a tech sell-off, with Wall Street experiencing its worst day in a month. This downturn was triggered by a combination of factors: a tech sell-off, fears surrounding the Chinese economy, and concerns over the valuation of AI-related companies. The tech-heavy Nikkei in Japan dropped 1.8%, South Korea's Kospi plunged 2.6%, and Australia's markets fell 1.5%. The tech giant Nvidia, valued at $4.5 trillion, led the sector decline, with a 3.6% drop as investors re-evaluated AI sector investments post-SoftBank's stake sale.
The Chinese economy also raised concerns, with data indicating a significant slowdown in investment. Fixed-asset investment shrank by 1.7% in the first 10 months, a record decline according to the National Bureau of Statistics. China's CSI 300 fell 0.7%, Hong Kong's Hang Seng dropped 0.9%, and Taiwan's Taiex slumped by 1.4%. The US markets were jittery, too, due to the impact of the longest federal government shutdown on economic data release.
Analysts highlighted the volatile week, with Jim Reid noting the contrast between relief over the shutdown's end and concerns over AI valuations and potential rate cuts. Kyle Rodda explained that while the Asian markets' weakness wasn't as severe as Wall Street's, there was still a notable sluggishness in risk assets. The sell-off was attributed to a combination of factors, including reduced Fed rate cut expectations and a loss of momentum in the AI trade, despite hopes for more stimulus from Chinese authorities.
