Global stocks tumble as AI panic grips markets; US adds 165,000 new jobs in October – business live | Business
Introduction: Global stocks tumble as AI panic grips markets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Fears that the Democratic Party’s blue wave in this week’s midterm elections will sink the AI investment boom are roiling markets, following heavy losses on Wall Street last night.
Asia-Pacific markets are a sea of red (unlike the US election map on Tuesday night!), as investors ditch tech stocks after more than $3.2tn was wiped off the US stock market yesterday.
Today, Japan’s Nikkei stock index has slumped by almost 6% – its worst drop since April 7 2025 during the ‘liberation day’ tariff panic.
South Korea’s KOSPI is down 6.7%, and Taiwan’s TAIEX has dropped by 4.5% in a broad rout.
Christopher Forbes, head of Asia and Middle East at CMC Markets, called the market action “a bit of a disaster”, explaining (via Reuters):
“(Clients) were long index, long stocks, and they all got carried out.
“All night, all day – we had client margin calls, client complaints, … because it’s a very emotional thing, right? People are wedded to their positions and views on a stock or outcome and you’re telling them, look, you’ve just lost money.
“And it’s not just a slap in terms of valuation. It’s basically a whole policy and six-year structural shift that says we’re now going to pause, we’re now going to cool AI, we’re now going to cool data centres, approvals and equity capital markets.”
After months of warnings that AI valuations were too high, and that the bubble might burst, US investors dashed to the exits en masse yesterday. The Nasdaq tech index slumped by 5.5%, while the Dow Jones Industrial Average (DJIA) dropped 1,833.06 points, or 3.44%, and the S&P 500 lost 4.36%.
Memory chip makers, who had been profiting from the AI boom, led the fallers – SanDisk slumped 22% and both Micron and AMD lost 17% of their value.
Chip giant Nvidia led the fallers on the DJIA, down over 9%.
Analysts pointed to policy uncertainty as Democrats are more critical of data centres, which could slow the rollout of AI investment – especially given public opposition to the sector.
Kyle Rodda, senior financial market analyst at Capital.com, says it was a “brutal sell-off” as fears about the future of the AI buildout gripped the markets.
The tumble in tech stocks that took hold in the immediate aftermath of the US midterm elections resumed as investors contemplated what a Democrat-controlled Congress may mean for tech regulation and the overall AI boom.
The regulatory and political risks arise at a time when the proverbial AI trade was already on shakier foundations. Earnings season has been an overall disappointment for the markets, with Magnificent Seven results so far undershooting growth expectations and flashing warning signs that the pace of AI spending is slowing down.
So, it could be a ‘tin hats on’ day in the markets. Investors will also be watching the latest US jobs report, for clues into the health of America’s labour market.
The agenda
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7am GMT: Lloyds house price index
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9am GMT: UN’s FAO food price index
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1.30pm GMT: US non-farm payrolls jobs report
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3pm GMT: University of Michigan’s US consumer confidence report
Key events
Hot jobs report ‘a problem’ for tech stock bloodbath
It may seem counter-intuitive, but today’s strong-looking US jobs report could be bad news for technology stocks.
That’s because the US Federal Reserve is more likely to raise interest rates if it believes the labor market can take the strain.
So while the US economy might be stronger than feared, that could lead to higher interest rates – which are monetary kryptonite for tech stocks.
Why? Because technology companies are valued on the promise of bumper earnings in the future (particularly in the nascent AI industry!), and higher interest rates make those future earnings worth less today (because you could just get a higher return from holding a bond, or even cash savings).
Nic Puckrin, a former Goldman Sachs analyst, says:
“The jobs report came in hot and that’s a problem for a tech sector that’s already in the middle of one of its biggest bloodbaths in history. It paves the way for rates to rise again in December and remain higher for longer – all bad news for tech valuations and the increasingly debt-fuelled AI buildout, especially now the sector is already being battered by expectations of stricter policies from the new Democratic Congress.
The numbers give the Fed carte blanche to prioritise inflation over jobs, so ordinary Americans should prepare for a 0.25 percentage point rate hike in December. That means higher borrowing costs, more upward pressure on mortgage rates and less chance of a Santa rally for the stock market. However, it could also mean better returns on cash savings.
US workers’ wages continued to lag behind inflation last month – one reason the Republicans did so badly in the midterm elections.
Over the past 12 months, average hourly earnings have increased by 3.1%, today’s jobs report shows – that’s below September’s annual inflation rate of 3.7% (which may rise to 4% in next week’s October data).
Where did the US economy add jobs last month
Employment in professional and business services increased by 70,000 in October, well above the average monthly gain of 15,000 over the prior 12 months.
Health care added 42,000 jobs in October, with employment gains in hospitals (+16,000), home health care services (+11,000), and outpatient care centers (+5,000).
Transportation and warehousing added 25,000 jobs, due to growth in couriers and messengers (+17,000) and air transportation (+4,000).
Manufacturing employment rose by 19,000, with job gains in computer and electronic product manufacturing (+7,000), machinery manufacturing (+4,000), and primary metal manufacturing (+4,000).
US unemployment rate down to 4.1%
The US unemployment rate has fallen too, to 4.1% from 4.2% in September.
The BLS reports there were 7.1m unemployed people in the US in October, and points out that the jobless rate has remained in a narrow range of 4.1% to 4.3% since March.
US jobs report beats forecasts
Newsflash: The US economy added many more jobs than expected in October.
Total nonfarm payroll employment rose by 165,000 in October, the US Bureau of Labor Statistics has reported, smashing forecasts of a 65,000 gain.
Employment increased in professional and business services, in health care, and in transportation and warehousing, the BLS says.
September’s jobs report has been revised up too – to show 60,000 new jobs were created, up from the first estimate of 29,000.
August was also stronger than first thought – with 186,000 new jobs, up from 133,000.
The tumble in the value of technology companies comes at an unfortunate time for Anthropic, the AI firm behind the Claude chatbot.
Anthropic is preparing to float on the US stock market, and had been aiming for a blowout valuation of $1.5 trillion.
But if an AI bubble appears to be popping, surely investors will push for a lower price?
Bloomberg have reported that investors had previously told bankers running the IPO that their estimate of a fair valuation had dropped to around $1.4 trillion, adding:
Some potential backers are discussing a $1.2 trillion to $1.3 trillion range for the company, according to a person familiar with the matter, who asked not to be identified as the information isn’t public.
While yesterday’s Wall Street selloff was dramatic – the biggest drop in 18 months – it is important to put it in context, says Daniel Nilsson, Senior Fund Manager at Isio:
The S&P 500 has essentially given back the gains made earlier in the week and is now around 2% below Monday’s closing level.
Markets had already become more sensitive to questions around the sustainability of AI-related capital expenditure and elevated technology valuations, and the latest political uncertainty has provided a further catalyst for that volatility.
Capital Economic’s chief North America economist Stephen Brown reckons the midterm election results won’t change near-term policy much, as the Democratic party still lacks a filibuster-proof Senate majority*.
But it raises the chance of sweeping legislative changes if the Democrats win the presidency in 2028, including tax hikes and regulation that could delay the AI rollout, Brown argues.
[* – under the rules of the US Senate, legislation needs 60 votes to overturn a filibuster – the practice where one member of the prolongs the debate on proposed legislation so as to delay an actual vote]
US investors will be returning to their desks and terminals, bracing for the latest jobs report in 45 minutes before Wall Street opens again.
October’s non-farm payroll report, due at 8.30am EST / 1.30pm GMT is expected to show a pick-up in hiring.
Economists expect around 65,000 new jobs were created last month, up from 29,000 in September (a figure that will probably be revised).
Stock market fear index drops back
Wall Street’s fear gauge has dipped slightly, a sign that US investors are slightly less panicky than yesterday.
The CBOE Volatility Index, known as the Vix, is down almost 5% this morning.
Yesterday it jumped by over 69% to its highest level since March, when the Iran war was spooking the markets.
(The Vix is derived from S&P 500 index options, and represents the market’s expectation of volatility over the next 30 days.)
The UK’s smaller share index, the FTSE 250, is also having a bad day.
The FTSE 250 is down 1.25% today, just a day after hitting an alltime intraday record high.
The index contains more domestic companies than the FTSE 100, so is a better gauge of the health of the UK economy.
US inflation data due next Tuesday could determie whether the sell-off continues, or not, predicts Daniela Hathorn, senior market analyst at Capital.com:
Global markets are ending a turbulent week in which the US midterm elections, concerns about AI investment and renewed uncertainty around interest rates have triggered significant volatility.
What initially looked like a technology-led correction has developed into a broader reassessment of risk, with Thursday’s sharp selloff on Wall Street highlighting how quickly concerns about one sector can spread across financial markets. Looking ahead, next week’s US inflation figures could prove decisive in determining whether equities stabilise or face another round of selling.
That inflation report will show how much pressure is building on the US Federal Reserve to hike interest rates to quash inflation….
The UK’s FTSE 100 share index is heading for its worst day since March despite not containing many tech stocks.
Some of the largest fallers, such as advertising group WPP (-4.9%) and data analysis form Relx (-4.44%), are companies who are thought to be under threat from AI, showing it is a broader sell-off.
Musk’s wealth has fallen by $113bn since midterms
The post-midterms market rout has been particularly painful for Elon Musk.
Musk (who put $446m of support into Republican campaigns), has lost around $113bn of wealth in the last two days.
This is because his two largest companies have both been badly hit in the sell-off.
Tesla fell 3.34% on Wednesday, as investors reacted to the Democrats’ electoral success, then 10.7% on Thursday. Musk owns 17.7% of the carmaker.
SpaceX lost 3.8% on Wednesday, then 9% yesterday – which also hurt Musk as he owns 10.3% of it.
In total, Musk’s paper wealth fell by $33.5bn on Wednesday, and then by another $79.7bn yesterday, according to Bloomberg’s Billionaires Index.
Despite this, Musk is still the world’s richest person with a paper wealth of $785bn, more than double Jeff Bezos in second place with $370bn.
Stock markets in developing nations have hit their lowest level in seven months today.
The MSCI Emerging Markets Index is down 2.7%, touching its lowest level since April and heading for a sixth straight weekly decline, Reuters reports.
London market on track for worst day since March
The sell-off in London is gathering pace!
The FTSE 100 share index is now down 189 points, or 1.75%, to 10,593 points.
That would be its biggest one-day drop since 19 March, when the Iran war was hitting the markets.
