Blistering AI Tech Rally Turns Ugly: Markets Hit by Global Selloff and Fed Fears
Market Turmoil and Economic Reactions
A look at the day ahead in European and global markets from Rae Wee
Asian Tech Stocks Plunge Amid AI Rally Reversal
An ugly selloff in technology stocks swept across Asia on Monday as investors slammed the brakes on the red-hot AI rally, with a more than 8% fall in South Korea's KOSPI triggering circuit breakers.
Wall Street Shakeout and Fed Rate Hike Expectations
The moves followed that of last week's shakeout on Wall Street, after a blowout U.S. jobs report ramped up expectations for Federal Reserve interest rate hikes — a bane for growth stocks.
Markets are now pricing in a more than 70% chance that the Fed will raise rates in December, up from a 45% chance a week ago, according to the CME FedWatch tool.
Impact of U.S. Jobs Report and Tech Earnings
Friday's nonfarm payrolls report came just days after Broadcom's underwhelming results last week, which sent its stock slumping and dragged share prices of other technology companies lower.
But that's the price to pay for perfection - when expectations run so high, even a small miss can deliver a huge blow.
Analyst Perspectives and Market Correction
Analysts and investors have, for the most part, dismissed the latest selloff as a "healthy correction", with concentration risks and leveraged positions amplifying the market moves, though it remains to be seen how long the rout will last.
Currency Markets and Economic Data
Elsewhere in markets, the dollar was at a two-month high, helped by the Fed hike bets and resilience in the U.S. economy.
The resurgent dollar pushed the yen deeper into intervention territory, leaving investors on alert for further yen-buying action from Tokyo to stem the currency's slide.
Japan's Economic Momentum and Data Releases
Revised gross domestic product data on Monday showed Japan's economy lost momentum in the January-March quarter from the previous three months on sluggish capital expenditure.
The data calendar for Monday is light, though the week ahead is headlined by the giant SpaceX listing and U.S. inflation data, alongside a European Central Bank policy meeting.
Geopolitical Tensions and Key Events
And the war in the Middle East rages on, with Israel saying it struck military targets in western and central Iran on Monday, even after U.S. President Donald Trump reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks.
Key Developments to Watch on Monday
Key developments that could influence markets on Monday:
- Boeing to release May numbers for deliveries and orders
- Global airline CEOs gathering for an event in Rio de Janeiro
- France: Reopening of 3-month, 4-month, 6-month and 11-month government debt auctions
- Germany: Reopening of 5-month and 11-month government debt auctions
(Editing by Sonali Paul)
