Stocks fall as Big Tech overshadows upbeat economy
· CNA · JoinLONDON : Global shares slid on Thursday, after Facebook owner Meta Platforms and Microsoft both warned of accelerating costs for artificial intelligence, while evidence of strong U.S. economic growth kept the dollar underpinned.
Big Tech's warnings stoked worries among investors that the pay-off for heavy spending on AI may take longer than many had hoped. And with Amazon and Apple due to report later in the day, the mood was cautious.
In currencies, the dollar fell back from three-month highs against the yen after the Bank of Japan kept interest rates on hold as expected, but carried a hawkish tone, prompting some analysts to raise the possibility of a December rate hike.
Investors were also treading warily ahead of U.S. non-farm payrolls data on Friday, the presidential election next Tuesday and a Federal Reserve policy decision on Thursday.
Data on Wednesday showed the U.S economy grew by an annualised 2.8 per cent in the third quarter, topping the 2 per cent mark for the eighth quarter out of the last nine, according Pepperstone strategist Michael Brown.
S&P 500 futures eased 0.8 per cent, while Nasdaq futures fell 1.0 per cent, suggesting more losses on Wall Street at the open. Shares in Microsoft and Meta, which have risen 15 per cent and 67 per cent, respectively, so far this year, fell in premarket trading by 3.5-4.0 per cent.
"We’ve seen it time and time again. We have these set-backs that have proved to be buying opportunities. The question now is are we at such a level in the market where investors aren’t going to be rushing to buy up the stock and much more likely to stand aside and sit on their hands," Trade Nation market strategist David Morrison said.
"There are so many excuses for not increasing your exposure to the market right now and the tech earnings have put the cherry on the top," he said.
AI darling Nvidia is the last of the so-called "Magnificent 7" megacap tech companies to report earnings, in about three weeks from now. Tesla reported last week, with Alphabet following on Tuesday.
FRAGILE NERVES
In Europe, the STOXX 600 fell in early trading, in a heavy day for earnings, as a drop in shares of French lender BNP Paribas after results and in tech stocks like ASML and SAP offset a bounce in energy and the wider banking sector.
In terms of macro risk events, the U.S. personal consumption expenditures index, the Fed's preferred measure of inflation, is due later on Thursday.
Meanwhile, in the final stretch of the U.S. presidential election contest, opinion polls still put Republican Donald Trump and Democrat Kamala Harris neck-and-neck, although financial markets and some betting platforms have been leaning towards a Trump victory.
The dollar index was steady at 104.10 following its pullback from the highest since Aug. 2 at 104.63 reached on Tuesday. The U.S. currency fell by the most against the yen, down 0.7 per cent to 152.36, although that was still not far from this week's high of 153.885.
The dollar is still up 6.4 per cent against the yen so far in October as political uncertainty in Japan following the coalition government's lost majority in parliamentary elections at the weekend, which potentially delays BOJ policy normalisation.
"It supports our forecast for the BoJ to raise rates sooner than current market expectations, although we have pushed back the timing of our forecast for the next rate hike from December to January in light of recent political instability in Japan," MUFG currency strategist Lee Hardman said.
"One final rate hike this year can’t be completely ruled out if the yen weakens sharply after the U.S. election," he said.
Japan's Nikkei share average closed down 0.5 per cent. South Korea's Kospi dropped 1.5 per cent, shrugging off a late recovery in shares in Samsung after the consumer electronics company said it was making headway in AI chip supply.
Gold reached a fresh all-time high of $2,790.15 per ounce, while oil prices were up 0.1 per cent at $72.62 a barrel, after weekly data showed an unexpected drop in fuel inventories that offered some reassurance about energy demand.
(Additional reporting by Kevin Buckland in Tokyo and Wayne Cole in Sydney; Editing by Jamie Freed, Sonali Paul and Toby Chopra)
Sign up for our newsletters
Get our pick of top stories and thought-provoking articles in your inbox
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app