By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
In markets, the trigger for sudden confidence swoons is often elusive, particularly when looking at periodic rotations out of high-flying U.S. tech stocks. And most signs suggest this week’s tech retreat may be more about re-positioning than investors receiving some lightning bolt of news. Tuesday’s tech shakeout led to a 1.5% plunge in the Nasdaq index even as the blue chip Dow Jones Industrials Average hit a record intraday high. But the tech slump dragged the S&P 500 down 0.6%, and U.S. equity futures showed little sign of a bounce early on Wednesday.
* Reasons for the sudden tech angst tended to be gathered after the event, with some pointing to comments late last week from OpenAI boss Sam Altman on inevitable bubbles in the sector and others pointing to different research papers fretting variously about both the limited returns on blistering AI spending to date and also its growing jobs destruction. The jitters also come ahead of next week’s earnings report from chip behemoth Nvidia, some concern about the wider implications of the U.S. government’s proposed stake in ailing chip giant Intel and caution ahead of the Federal Reserve’s annual Jackson Hole conference this week.
* Even though Fed concerns were cited across markets on Tuesday, there was little shift in Fed futures pricing during the day – and they still show just over an 80% chance of a rate cut next month. With Fed meeting minutes due later today and 20-year bonds under the hammer too, Treasury yields were flat and the dollar firmer. An unexpected pick-up in housing starts in July was reported on Tuesday but this was offset by a drop in building permits to five-year lows.
* Tech-heavy stock indexes overseas were hit by Wall Street’s wobble, with Japan’s Nikkei losing 1.5% and South Korea’s Kospi down 0.7%. Lifted on Tuesday by Ukraine deal hopes, European stocks were flatter today, with euro inflation coming in bang on forecast and a hotter-than-expected UK inflation reading downplayed due to seasonal airfare skews. Chinese stocks outperformed, with the Shanghai main index rallying to 10-year highs, as investors rotated stock holdings and hoped for more government stimulus.
Be sure to check out today’s column, which looks at a particular dilemma facing the Fed: should it ease to offset weakness in the housing market if that means spurring the blistering AI infrastructure boom?
Today’s Market Minute
* U.S. and European military planners have begun exploring post-conflict security guarantees for Ukraine, U.S. officials and sources told Reuters on Tuesday, following President Donald Trump’s pledge to help protect the country under any deal to end Russia’s war.
* Alongside a massive build-up in conventional military firepower, China has embarked on a rapid and sustained increase in the size and capability of its nuclear forces, according to the U.S. military and arms control experts.
* British inflation hit its highest in 18 months in July when it increased to 3.8% from 3.6% in June, official data showed on Wednesday, once again leaving the country with the biggest price growth problem amongst the world’s big rich economies.
* A glaring mismatch between benchmark oil prices and expectations of a looming supply overhang has created an imbalance that could end badly for traders, writes ROI energy columnist Ron Bousso.
* Trump has faced little opposition in his drive to rip up the global economic rule book. The only exception has been “the market”. But now even investors are holding their fire, claims ROI markets columnist Jamie McGeever, enabling more risk to build up in the financial system.
Chart of the day
Americans are deeply concerned over the prospect that advances in artificial intelligence could put swaths of the country out of work permanently, according to a new Reuters/Ipsos poll. The six-day poll, which concluded on Monday, showed 71% of respondents said they were concerned that AI will be “putting too many people out of work permanently.”
Today’s events to watch
* Federal Reserve meeting minutes released (2:00 PM EDT); Board Governor Christopher Waller and Atlanta Fed President Raphael Bostic speak
* U.S. corporate earnings: Target, Nordson, TJX, Lowe’s, Estee Lauder, Progressive, Analog Devices
* U.S. Treasury sells $16 billion of 20-year bonds
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Aidan Lewis)
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