Global stock markets declined on Tuesday, with Tokyo and Seoul leading the losses, as investors grew increasingly concerned about inflated tech valuations and the potential for a third consecutive interest rate cut by the Federal Reserve. The anxiety is centered around the record rally this year, driven by the fear of missing out on the artificial intelligence (AI) bandwagon and bets on declining US borrowing costs.
The focus is now on the upcoming earnings report from Nvidia, a leading AI chip manufacturer, which will provide insight into the sector’s outlook. Retailers Home Depot, Target, and Walmart will also release their reports, offering a glimpse into consumer sentiment. Investors are sensitive to any negative news surrounding the AI universe, and the recent sale of Nvidia stakes by tech billionaire Peter Thiel’s hedge fund has added to the uncertainty.
The US September jobs report, scheduled for release on Thursday, will provide a fresh snapshot of the world’s largest economy and influence the chances of another rate cut. The likelihood of a December reduction is currently around 50-50, with Fed officials expressing concerns about inflation. Bank boss Jerome Powell has stated that another cut is not a “foregone conclusion,” and his colleagues have echoed this sentiment.
However, Fed governor Christopher Waller has emphasized the importance of the labor market, suggesting that another cut may still be necessary. The conflicting views have led to uncertainty among investors, causing them to exercise caution. The yield on the 20-year Japanese government bond has reached its highest level since 1999, amid speculation about the country’s economic stimulus package.
Asian markets have struggled, with Tokyo and Seoul experiencing significant losses. The yen has slipped to its weakest level since January, and the possibility of officials intervening to provide support has increased. The selling has been widespread, with Hong Kong, Sydney, and other major markets also declining. Bitcoin has continued to struggle, falling below $90,000 for the first time in seven months.
The upcoming events will be closely watched, as investors seek clarity on the direction of the economy and the tech sector. The Nvidia earnings report and the US jobs data will be crucial in determining the next steps for investors and policymakers. As the global economy navigates this period of uncertainty, market volatility is likely to continue, and investors will be closely monitoring developments in the AI sector and the broader economy.