Global stock markets fell on Wednesday, with technology stocks taking a hit following record-breaking sell-offs of US chipmaker Nvidia. Additionally, concerns over China’s bleak outlook and oil prices dropping to multi-month lows added to the market’s woes.
Nvidia plummeted over 9% during regular trading in the US on Wednesday, dragging down semiconductor stocks and triggering a sell-off on Wall Street. As part of an antitrust investigation, Nvidia received a subpoena from the US Department of Justice, as reported by Bloomberg the day before. The company’s stock continued to slide in after-hours trading on Tuesday, resulting in a market capitalization loss of around $279 billion, marking the largest single-day decline in US stock market history.
The previous record was held by Meta, the parent company of Facebook, which saw a $232 billion market value drop in one day in February 2022.
Justin Onuekwusi, chief investment officer at investment firm St. James’s Place, highlighted the risk of overconcentration in the stock market, stating that the volatility of these stocks can affect the entire market.
The MSCI global stock index, tracking stocks from 47 countries, declined by 0.5% in September, historically known for market downturns. Analysts noted that a variety of factors contributed to the market decline, with capital flowing back into the market post-summer leading to increased market volatility.
Brent crude futures fell by 0.6% to $73.34 per barrel, easing some earlier losses, while US crude ended down 0.6% at $69.96, both close to their lowest levels since December. Both dropped nearly 5% on Tuesday.
Concerns over China’s sluggish economic outlook, coupled with a global economic slowdown potentially signaling reduced fuel demand, exacerbated the downward trend in oil prices.
Vishnu Varathan, head of macroeconomic research for Asia Pacific at Mizuho Bank, attributed the market conditions to various factors including Nvidia’s performance, weak US data, and economic uncertainties in China.
In Asia, Samsung Electronics saw a 3.45% decrease in stock prices, while SK Hynix, which supplies high-bandwidth storage chips to Nvidia, dropped by 8%.
Tokyo Electron fell by 8.5%, semiconductor testing equipment supplier Advantest nearly plummeted by 8%, and SoftBank Group, the Japanese investment holding company that owns shares in chip design company Arm, declined by 7.7%.
Taiwan Semiconductor Manufacturing Company (TSMC) slid over 5%. TSMC manufactures high-performance graphics processing units for Nvidia, which power large language models – machine learning programs capable of text recognition and generation. Foxconn, known internationally as Hon Hai Precision Industry, fell by nearly 3%, maintaining a strategic partnership with Nvidia.
The sell-off in Asia had a ripple effect on European semiconductor stocks. ASML, a key equipment manufacturer for advanced chip production, saw a 5% decline in stock prices during early trading. Other European companies like ASMI, Be Semiconductor, and Infineon also experienced losses.
European stock markets dropped by 1%, with major markets in London, Paris, and Frankfurt falling by 0.6% to 0.9%.
Prospects of US economic data intensified market risk aversion, including upcoming reports on job vacancies, unemployment claims, and the closely watched non-farm payroll report.
Given the Federal Reserve’s focus on the labor market, Friday’s data release may determine the expected scale of interest rate cuts this month.
Alex Loo, FX and macro strategist at TD Securities, expressed optimism regarding the US economic growth concern, anticipating a strong employment report on Friday.
Economists surveyed by Reuters expected the US economy to add 160,000 jobs in August, rebounding from the 114,000 added in July.
Ahead of the data release, currency and US bond volatility was less pronounced compared to the stock market.
The benchmark 10-year US Treasury yields declined by nearly two basis points to 3.82%, while the two-year treasury yield dropped to 3.84%.
Supported by safe-haven demand, the US dollar remained steady.
Benefitting from the stock market decline, the Japanese yen, a safe-haven asset, strengthened the most against the dollar by over 0.4%, reaching 144.89 and ultimately rising above 0.4% to 144.90.
(Adapted from CNBC report)