Introduction: Global stocks wobble as AI fears grow
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
A fresh wave of selling hit AI stocks around the world overnight, as investor grow increasingly anxious around the sustainability of AI-fuelled returns.
The Japanese and South Korean stock markets, which have been buoyed up by their exposure to the AI investment boom, fell before recovering some ground to trade broadly flat on the day.
And over in the US, the blue chip S&P 500 fell by 1.2%, its worst performance since July, and the tech heavy Nasdaq dropped by 2.6%, its biggest drop since June. The Philadelphia semiconductor index fell by a painful 6.7%, also its worst day since June.
Jim Reid, of Deutsche Bank, says our gloomy weather is reflected in the stock market:
And in a further sign that investors are taking a decidedly more conservative approach – there has been a strong move towards US Treasuries, widely considered the best quality government debt in the market and a safe haven asset. Reid says:
Ipek Ozkardeskaya, an analyst at Swissquote, says that the falling value of some of the biggest tech and AI stocks in the world suggests that the bubble in the sector is bursting.
Investors will be watching closely next week as Microsoft, Google, Amazon and Sandisk are all due to report their latest results.
Elsewhere this morning, British retail sales fell by 0.4% in September, compared with expectations of a drop of 0.1%.
An unseasonably warm start to the autumn weighed on online clothing vendors and supermarkets also saw a drop in volumes, official figures showed on Friday.
Thomas Pugh, chief economist at RSM UK, said:
The agenda
7am BST: British retail sales
9am BST: Flash PMI for Eurozone
9.30am BST: Flash PMI for UK, construction statistics for Great Britain 2025
11.30am BST: Russia’s interest rate decision
3pm BST: Flash PMI for US, University of Michigan’s US consumer confidence index
It is red across the board in the European stock market this morning, though the falls are not steep. The UK’s blue chip FTSE 100 index is down 0.4%, while the French Cac 40 is down 0.7%. The German Dax is down by 0.6%.
The Stoxx 600, which tracks the biggest companies across the continent, has fallen by 0.4%.
While less red tape will be welcome news for small businesses, the chancellor is still facing pressure from bigger companies in the UK for more support.
Earlier this month some of the UK’s biggest retailers and hospitality businesses, including Tesco, Costa Coffee and the Co-op, met John Healey to urge him to cut the cost of employing young people in his first budget.
Businesses have asked for a partial reversal of the surprise move by Healey’s predecessor, Rachel Reeves, who lowered the earnings threshold at which they start to pay national insurance contributions (Nics) from £9,100 to £5,000 a year. They argue the change contributed to the plunge in the number of high street jobs for young people and part-time workers and a rise in youth unemployment.
They want the Nics threshold raised to £6,000, arguing this would help create jobs and ease inflation pressures on high streets.
Government says it will 'slash red tape' to save businesses £800m
The UK government has promised it will “slash red tape” for businesses, in reforms it claims will save firms across the country £800m in administrative and tariff costs per year.
The changes will make compliance guidance clearer, simplify the UK’s corporate reporting requirements and extend import tariff suspensions on products favoured by businesses, it said.
It comes as pressure grows on prime minister Andy Burnham and chancellor John Healey to reduce the cost of doing business in the UK ahead of the budget next week.
The government has set itself a target of reducing the administrative burden of regulation on businesses by 25% by the end of the current parliament.
Burnham and business secretary Jonathan Reynolds are scheduled to meet with small business leaders at No 10 North today, where they are expected to accept recommendations from the Small Business Taskforce.
Burnham said in a statement:
Healey said:
Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said that the changes were a “welcome step towards giving smaller firms more time and headroom to focus on their businesses.”
Brent crude hits $114 a barrel
And pressure continues to build this morning, with oil prices rising again. Brent crude, the international benchmark for oil, is up 1% this morning to $114 a barrel – its highest level since May.
Richard Hunter, of the broker Interactive Investor, points out that oil is now up by about 60% since the start of the US-Israeli war against Iran, and up around 90% in the year so far.
Susannah Streeter, of the broker Wealth Club, says fears are rising that American and Israeli forces will be ordered to launch strikes on Iran’s energy infrastructure after the US mid-term elections.
UK consumer confidence falls at fastest rate since Covid as cost of living bites
Consumer confidence in the UK has fallen at the fastest rate outside the Covid pandemic since the 2016 Brexit vote as the escalating economic damage from the war in the Middle East hits Britain.
With less than a week before John Healey’s first budget, the latest barometer from the data company GfK indicated confidence plunged by 11 percentage points in October to -24 amid pressure on consumers from the rising cost of living.
Highlighting the challenge for Andy Burnham and his chancellor before the statement on Wednesday, GfK said its consumer confidence index last fell by this much in a single month in July 2016, following the shock leave result in the EU referendum.
The index – which has been closely tracked by the government and the Bank of England for early warning signs from the economy since the early 1970s – recorded its largest ever fall, of 25 points, in March 2020 just after the start of the first UK lockdown.
Neil Bellamy, consumer insights director at GfK, said:
Gloomy picture for retailers in Christmas quarter, economists warn
Economists are warning there could be more gloom ahead for retailers as they enter into the crucial final quarter of the year – which includes Christmas.
Paul Dales, chief UK economist at Capital Economics, said:
Jacqueline Windsor, head of retail at PwC UK, noted that fashion retailers had fared the worst in September, despite the warm weather.
Introduction: Global stocks wobble as AI fears grow
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
A fresh wave of selling hit AI stocks around the world overnight, as investor grow increasingly anxious around the sustainability of AI-fuelled returns.
The Japanese and South Korean stock markets, which have been buoyed up by their exposure to the AI investment boom, fell before recovering some ground to trade broadly flat on the day.
And over in the US, the blue chip S&P 500 fell by 1.2%, its worst performance since July, and the tech heavy Nasdaq dropped by 2.6%, its biggest drop since June. The Philadelphia semiconductor index fell by a painful 6.7%, also its worst day since June.
Jim Reid, of Deutsche Bank, says our gloomy weather is reflected in the stock market:
And in a further sign that investors are taking a decidedly more conservative approach – there has been a strong move towards US Treasuries, widely considered the best quality government debt in the market and a safe haven asset. Reid says:
Ipek Ozkardeskaya, an analyst at Swissquote, says that the falling value of some of the biggest tech and AI stocks in the world suggests that the bubble in the sector is bursting.
Investors will be watching closely next week as Microsoft, Google, Amazon and Sandisk are all due to report their latest results.
Elsewhere this morning, British retail sales fell by 0.4% in September, compared with expectations of a drop of 0.1%.
An unseasonably warm start to the autumn weighed on online clothing vendors and supermarkets also saw a drop in volumes, official figures showed on Friday.
Thomas Pugh, chief economist at RSM UK, said:
The agenda
7am BST: British retail sales
9am BST: Flash PMI for Eurozone
9.30am BST: Flash PMI for UK, construction statistics for Great Britain 2025
11.30am BST: Russia’s interest rate decision
3pm BST: Flash PMI for US, University of Michigan’s US consumer confidence index
