Introduction: Market selloff continues
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global markets are racking up their fourth day of losses in a row, as concerns over technology valuations are worrying investors.
Asia-Pacific stocks have dipped to a one-month low today, amid signs that the enthusiasm that has driven stocks higher in recent months is fading, with shares, risky currencies and crypto assets all sliding
MSCI’s broadest index of Asia-Pacific shares outside Japan has lost 1.8%, slipping to its lowest level since mid-October. South Korea’s KOSPI has lost 3.5%, and Hong Kong’s Hang Seng is down 1.9%.
Japan’s Nikkei 225 is also having a very rough day, down over 3%, on concerns over an escalating dispute with China over Taiwan
Last night, the US stock market fell, with the S&P 500 share index closing at its lowest level in a month.
European stock markets are heading for losses when trading begins at 8am GMT too.
Various reasons are being cited for the mood change. Investors are fretting that US interest rates may not be cut as quickly as hoped, following hawkish commentary from some policymakers.
Jitters are building ahead of AI behemoth Nvidia’s results on Wednesday night.
The huge sums of money being committed by AI companies to fund their infrastructure is also raising eyebrows, especially as it is being increasingly funded by debt.
Last night, Amazon raised $15bn in its first US dollar bond offering in three years, adding to a spree of jumbo debt sales by technology firms as they race to fund artificial-intelligence infrastructure.
Michael Brown, senior research strategist at brokerage Pepperstone, explains:
Those Nvidia earnings, incidentally, once again stand as a major macro risk, as enthusiasm around the whole AI frenzy seems to ebb, with the market having shifted from an ‘all capex is good capex’ mood, to one where whether firms are actually able to monetise that expenditure has become the million (or more!) dollar question.
On that note, Amazon kicking-off a six-part bond sale didn’t help matters much yesterday, following hot on the heels of similar sales from Meta and Alphabet in recent weeks, and further fuelling concern that AI expansion is now being fuelled by debt, and not by free cash flow, in turn exacerbating jitters over the sustainability of all the spending that we currently see.
The agenda
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10am GMT: Treasury Committee hearing on risks and rewards of embracing crypto
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1pm GMT: Huw Pill, Bank of England’s chief economist, to give speech at Skinners Hall, London
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3pm GMT: US factory orders and durable goods data for August (delayed by lockdown)
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Key events
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Wall Street’s fear index has hit a one-month high today, Reuters reports, as investors have grown more jittery.
The CBOE volatility index, known as the VIX, is currently up 1.2 points at 23.58 points.
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We also have fresh evidence that US companies cut jobs last month.
With official economic statistics slowly roaring back into life after the US government shutdown, economists are indebted to other sources, such as payroll operator ADP.
According to ADP’s latest weekly data, US companies shed 2,500 jobs per week on average in the four weeks to 1 November.
That suggests the pace of job cuts slowed at the end of the month – a week ago, ADP reported that US companies shed 11,250 jobs per week on average in the four weeks ending on 25 October.
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BofA’s European Fund Manager Survey: Getting more and more bullish
Ironically, today’s sell-off comes at a time when optimism among European investors improving.
Bank of America’s latest fund manager survey, released today, found that a net 77% of respondents expect stronger European growth over the coming twelve months, up from 57% last month. That’s the highest reading since mid-2021.
BofA say:
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Growth optimism continues to build, especially in Europe, while the US labour market & an AI bubble is a concern but not more
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Record bullishness on European equities driven by hopes for earnings upgrades, though Europe’s relative appeal has slipped
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Banks remain the biggest sector overweight in Europe amid broadening confidence in cyclicals versus defensives outperformance
ShareThe floor at the New York Stock Exchange. Photograph: Brendan McDermid/Reuters
We’re still expecting Wall Street to open lower in about an hour, after chunky losses yesterday.
The S&P 500 index, which lost 0.9% yesterday, is down another 0.5% in the futures market.
Fawad Razaqzada, market analyst at FOREX.com, says:
US index futures came off their worse levels at the European open, before resuming lower a few hours later along with European markets as the bounce didn’t have much firepower.
Markets have been under intense pressure in recent days across the world, with the risk off sentiment also hurting cryptocurrencies, copper and commodity dollars. Even gold has been forced lower despite being a haven asset.
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Cloudflare outage takes websites offline
Robert Booth
A key piece of the internet’s usually hidden infrastructure suffered a global outage today, causing error messages to flash up across websites.
Cloudflare, a US company whose services include defending millions of websites against malicious attacks, suffered an unidentified problem on Tuesday, which meant internet users could not access some customers’ websites.
Neither could some site owners access their performance dashboards. Sites including X and Open AI suffered increased outages at the same time as Cloudflare’s problems, according to Downdetector.
The outage is ongoing but as of 12.21pm GMT, the company said:
“We are seeing services recover, but customers may continue to observe higher-than-normal error rates as we continue remediation efforts.”
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Updated at 08.57 EST
FTSE 100 index near one-month low
Britain’s blue-chip share index has fallen further through the morning, to its lowest level in almost a month.
The FTSE 100 index is now down 132 points, or 1.35%, at 9543 points. That’s its lowest level since 23 October.
Kathleen Brooks, research director at XTB, says:
There are multiple drivers of markets right now, including fears about AI tech stock valuations, concerns about a weakening US economic outlook, and concerns that the Fed won’t cut interest rates fast enough.
Even traditional safe havens are faltering this morning; gold is lower by $23 per ounce and is just about clinging on to the $4,000 level. Luxury stocks, which used to be considered ‘recession proof’, are leading European indices lower. Hermes and LVMH are some of the worst performers on the Eurostoxx so far on Tuesday and are falling alongside tech stocks such as Dutch giant ASML.
In FX, the yen and the Swiss Franc are performing like their safe haven status would suggest, and they are leading the G10 FX pack so far this morning.
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JPMorgan’s Pinto Warns of Possible ‘Correction’ in AI Valuations
Valuations in the booming AI industry are due for a reassessment, according to JPMorgan Chase & Co. Vice Chairman Daniel Pinto.
Speaking at the Bloomberg Africa Business Summit in Johannesburg today, Pinto also warned that any decline would reverberate across the stock market.
Pinto warned:
“There is probably a correction there.
That correction will also create a correction in the rest of the segment, the S&P and in the industry.”
Concern has been growing in recent weeks that the valuations of the world’s largest technology companies could have risen too high, based on an overly optimistic view of how quickly AI would delivery productivity benefits.
As Pinto explains:
“In order to justify these valuations, you are considering a level of productivity that, it will happen, but it may not happen as fast as the market is pricing now.”
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Ireland’s finance minister steps down to join World Bank
Lisa O’Carroll
Ireland’s long-standing finance minister Paschal Donohoe is to step down to join the World Bank as its managing director.
Donohoe, who has been in finance or public expenditure departments for the past 10 years, will also step down from his job as head of the Eurogroup, the alliance of member states who use the euro currency.
The Irish cabinet was given the surprise news on Tuesday and was told that the appointment of Donohoe to the board of the World Bank had been approved on Monday night.
Donohoe has been a stalwart of Irish politics during Brexit years, covid and beyond and his steady hand made him seem as a potential front runner for taoiseach.
But he lost out on a key opportunity last March 2024 when the leadership of his Fine Gael came up with Simon Harris quickly amassing enough support within the party to take over following the resignation of the former Taoiseach Leo Varadkar.
He has been tipped for international jobs ever since, including the head of the International Monetary Fund, however he has always professed loyalty to his position in the Irish cabinet or missed out to other candidates.
His resignation could trigger a cabinet reshuffle but it will also prompt what is likely a hard by-election in Dublin central, a constituency shared in the multi seat system by Sinn Féin leader Mary Lou McDonald, and in which Gary Hutch – who had links with the Hutch criminal gang – also ran in last November’s general election.
Donohoe’s departure is a significant blow to the Fine Gael and Fianna Fáil partnership and to the EU as one of the longest serving ministers attending EU summits.
He played a significant role in protecting Ireland’s economic strategy in relation to foreign investment and corporate tax when under serious international attacks from the likes of France and a court case, which Ireland ultimately won, over the Apple’s corporate tax.
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Updated at 06.15 EST
Julia Pyke, joint managing director of the nuclear power project Sizewell C, said:
Cornwall Insight’s analysis shows exactly why Britain needs more nuclear, not less.
A stable, low-carbon baseload from projects such as Sizewell C avoids the expensive system charges that households are now paying for and protects the UK from volatile markets from overseas.
She said the RAB (regulated asset base) contribution, a new charge on UK electricity bills to help fund new nuclear power stations, is little more than £10 a year,
but it unlocks at least 60 years of clean, reliable, homegrown power that can stabilise bills for generations and creates tens of thousands of British jobs and opportunities which completely transforms communities.
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Cornwall Insight: Energy price cap to dip by 1% to £1,733 annual bill from January
The forecaster Cornwall Insight has issued new forecasts for the January energy price cap.
The energy regulator Ofgem’s price cap is expected to dip by 1%, taking it down by £22 to an average bill of £1,733 a year for a typical household from January.
But analysts at the specialist consultancy said they expect the price cap to tick higher again from April.
Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, said:
As temperatures drop, many will be worried about how they are going to pay their energy bills. Rumoured cuts to home insulation schemes at the budget next week could leave the most vulnerable households facing higher bills for years to come and exposed to the kind of price spikes we’ve seen over the past few years.
Low levels of investment into infrastructure like schools has been mirrored in our electricity system and that is now catching up with us. But an upgraded power grid will enable the UK to use more of its own renewable power, making it less reliant on foreign gas imports and less at the mercy of the kinds of foreign price swings that saw household bills soar.
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Updated at 05.03 EST
Crest Nicholson warns on profits amid ‘subdued’ summer sales and budget uncertainty
The housebuilder Crest Nicholson has put out a profit warning after “subdued” sales over the summer, and also blamed uncertainty around the government’s tax policy ahead of the 26 November budget.
The shares tumbled 13% on the news.
The company is closing one divisional office and will cut 50 jobs, including staff at the site and some “selective other roles” across overhead functions.
Crest said its adjusted profit before tax for the year to 31 October would be at the low end, or slightly below, its range of £28m to £38m,
reflecting a housing market that has remained subdued through the summer, and the continued uncertainty surrounding government tax policy ahead of the forthcoming budget.
It cautioned that near-term market conditions were likely to remain challenging.
The company expects to complete 1,691 homes this year, at the lower end of its range of between 1,700 and 1,900 homes, including 35% affordable units.
Its sales rate was 0.51, compared with 0.48 in 2024, although it dropped to 0.45 in the last 13 weeks of its financial year.
It has sold five land parcels from larger sites as it trims its landbank, and is working on a new house type range.
Rival builder Taylor Wimpey has also reported a drop in sales in the key autumn period.
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Updated at 04.52 EST
Eight firms under investigation in crackdown on additional online fees
Britain’s competition watchdog has begun investigations into eight companies about their online pricing practices, expressing concern over additional fees and sales tactics such as “drip pricing” and “pressure selling”.
The Competition and Markets Authority (CMA) said it was looking into the ticket sellers StubHub and Viagogo; AA Driving School and BSM Driving School; the US gym chain Gold’s Gym; and the retailers Wayfair, Appliances Direct and Marks Electrical.
The investigations are the first launched by the CMA using its new consumer protection powers. The watchdog said it had concerns over practices including drip pricing – when consumers are shown an initial price and then face additional fees in the checkout process – and the use of misleading countdown timers, which are banned under the new regime.
The investigations follow a cross-economy review by the CMA since April of more than 400 businesses in 19 sectors to assess their compliance with price transparency rules.
The watchdog has also written advisory letters to 100 businesses across 14 sectors outlining concerns about their use of additional fees and sales tactics. It is publishing new guidance for businesses to help them comply with the law.
The regulator’s new powers enable it to decide whether consumer laws have been broken, rather than having to go through the courts. If the CMA finds there has been an infringement of the law, it can order businesses to pay compensation to affected customers, and can fine companies up to 10% of global turnover.
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