Technology companies were the reason for the decline in stock markets on Tuesday due to growing concerns about investment bubbles in artificial intelligence ahead of earnings reports from major sector players.
Google drew attention by reporting serious network outages in several cloud services provided by the American tech giant from its European data center in London, which particularly affected UK banks.
The situation was exacerbated by rising oil prices, driven by increased anxiety over potential supply interruptions before winter in the Northern Hemisphere. The main US crude oil contract, West Texas Intermediate, jumped by more than five percent before stabilizing at a growth rate of 2.2 percent, reaching $105.92 per barrel. Brent North Sea oil also increased by 0.2 percent, amounting to $109.67 per barrel.
About half an hour after trading began on Wall Street, a decline was observed due to ongoing volatility in AI-related stocks as investors analyzed mixed industrial company reports. Steve Sosnik from Interactive Brokers noted that 'we are back to the same concerns as before,' referring to worries about AI profitability, but added that traders 'are still inclined to buy on every dip.'
The widely diversified S&P 500 index and the tech-heavy Nasdaq Composite Index lost several percentage points, while the Dow index rose by 0.3 percent. The morning rally in the technology sector on Wall Street did not carry over to Asian markets, where AI-related stocks faced new downward pressure on their prices, said Rass Mould, head of investment at AJ Bell. European markets struggled: London, Frankfurt, and Paris traded down by approximately half a percent.
In Asia, the main selling pressure returned to Seoul and Tokyo, as chip giants SK hynix, Samsung, and Kioxia incurred further losses due to the sharp outflow from a sector that had shown explosive growth in the first half of this year. The Korean market index Kospi fell almost four percent, with SK hynix declining by 4.2 percent and Samsung by three percent. An additional factor influencing sentiment was the collapse of the shares of data center infrastructure firm Elice by more than 30 percent on its debut day.
The Euro remained stable against the dollar but came under pressure because France and Italy faced mass protests over the cost of living, which led to a rise in government bond yields. The yield on French 10-year government bonds rose to 4.94 percent on Tuesday, more than 150 basis points higher than the comparable German government bond, which is considered the European benchmark for creditworthiness. The gap between these two yields is the largest since January 2012, when the eurozone experienced a credit crisis that required intervention by the European Central Bank to prevent uncontrolled increases in borrowing costs.
Key figures around 4:00 PM (SA time)
According to data, the Dow index in New York rose by 0.3 percent, reaching 52,138.51 points. The S&P 500 index in New York fell by 0.1 percent to 7,682.90. The Nasdaq Composite in New York dropped by 0.5 percent to 26,292.05. The FTSE 100 index in London fell by 0.6 percent to 10,699.89. The Paris CAC 40 index fell by 0.7 percent to 7,811.65. The German DAX index in Frankfurt fell by 0.6 percent to 25,169.71. The Tokyo Nikkei 225 closed down by 1.3 percent, at 64,075.52. The Korean Kospi index fell by 3.7 percent, reaching 5,552.74. The Hong Kong Hang Seng Index fell by 1.3 percent to 23,867.74. The Shanghai Composite rose by 0.1 percent, reaching 3,735.37.