Tech rout deepens worldwide as US labor signals confuse Fed
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Asian and European markets fell sharply as investors dumped tech shares, worried that uncertain rate signals and volatile earnings could trigger deeper losses.
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A pedestrian passes by the Hong Kong Stock Exchange electronic screen in Hong Kong, in 2023. (AP)
Asian markets extended a global sell-off after a closely watched US employment report failed to clarify the Federal Reserve’s near-term path on interest rates, prompting investors to dump risk assets despite another blockbuster earnings performance from Nvidia.
European equities were set for a sharply lower open, with EURO STOXX 50 futures down 1.4% and FTSE futures slipping 1%. Wall Street futures edged 0.2% higher in Asian trading.
US markets closed lower overnight amid renewed anxiety over stretched tech valuations. Nvidia’s upbeat forecasts were not enough to steady sentiment, and the Nasdaq saw its biggest one-day swing since April 9, when Trump administration tariffs rattled investors.
The labor market picture offered little reassurance: September payrolls came in far stronger than expected, yet the unemployment rate rose and previous months were revised down, an unsettling mix that leaves the Fed with scant clarity ahead of its December meeting.
Fed officials strike cautious tone
Treasury yields declined as futures markets priced in a 40% chance of a rate cut in December, up from 30% the day before. But with the next jobs report due only after the Fed’s meeting, traders remain unconvinced that easing is imminent.
MCPI’s broadest Asia-Pacific index outside Japan fell 2.2%, extending weekly losses to 3.5%, its steepest drop since early April. Japan’s Nikkei sank 2.2% and is down 3.3% on the week. Taiwan slumped 3.4%, South Korea fell 3.7%, and the CSI 300 and Hang Seng each dropped 1.5%.
“There is no doubt the US tech sector shows bubble-like characteristics,” Diana Mousina, deputy chief economist at AMP, told Reuters.
“That doesn’t necessarily mean it has to burst; the bubble could simply deflate,” Mousina added.
She stressed that, with the US government shutdown resolved and the Trump administration offering concessions on tariffs, seasonal trends could support equities into year-end.
Several Federal Reserve policymakers warned of emerging risks around financial stability, noting the possibility of sharp asset-price corrections. Cleveland Fed President Beth Hammack told Reuters that cutting rates now would carry “a wide range of risks,” while Governor Lisa Cook flagged the threat of steep market declines.
Japan unveils major stimulus package
In Tokyo, Prime Minister Sanae Takaichi’s cabinet approved a ¥21.3 trillion ($135.5bn) stimulus package, her first major initiative since taking office. Concerns over expanded fiscal policy kept pressure on the yen, which hovered at 157.24 per dollar, near a 10-month low and down 6% this quarter amid rising fears of government intervention.
Bond markets steadied after Takaichi signaled overall JGB issuance would be lower than last year. 10-year yields fell 3 basis points to 1.785%, retreating from a 17-year high.
Japan’s inflation data added to expectations of a rate increase, with core consumer prices rising 3% in October. BOJ Governor Kazuo Ueda said the bank would assess both the “feasibility and timing” of tightening in the coming meetings.
“If the yen stays weak and data continue to show both economic recovery and rising inflation, we expect the BOJ to act, anchoring its decision in data, not political pressure,” ING senior economist Min Joo Kang told Reuters.
Treasuries were steady in Asian trading after Thursday’s gains. The two-year yield held at 3.545%, while the 10-year yield was little changed at 4.0922%.
Oil extended losses, falling 1.2% to $58.29 as Washington intensified pressure on Ukraine to accept a peace agreement with Russia. Prices are down 3% for the week, and spot gold slipped 0.5% to $4,055 an ounce.
