LONDON/SINGAPORE – Global markets retreated on Friday as Wall Street’s selloff spread globally, with volatility weighing on precious metals and cryptocurrencies, while AI concerns weighed on equities.
The MSCI All Country World Index rebounded from its intraday lows to trade flat, but the benchmark was still down 1.6% and on track for its worst weekly performance since mid-November.
Spending on AI by Amazon, Microsoft, Google, and Meta is expected to reach $600 billion this year, raising concerns about the cost of the artificial intelligence boom, as well as concerns about disruption.
Sectors such as software and data services continued to perform well.
“It’s been almost a week of two halves,” said Fiona Cincotta, senior market analyst at City Index. “At the beginning of the week we had worries about AI software and at the end of the week we had worries about AI spending.”
“I think all of this together shows how sensitive and nervous the market really is when it comes to the whole AI story.”
Wall Street stocks sold for a third straight day on Thursday on concerns about AI, pushing the S&P 500 index into negative territory for the year, after survey data showed the number of layoffs announced by U.S. employers in January surged to a 17-year high for the month, raising concerns about the resilience of the U.S. economy.
The S&P 500 Software and Services Index fell 4.6% on Thursday, losing about $1 trillion in market capitalization since Jan. 28, in what traders and investors are calling “Softwaremageddon.”
“There’s a massive rotation going on and the Nasdaq is clearly underperforming the S&P, boring consumer staples, etc.,” said Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management.
“The market is starting to say, ‘Okay, AI is very interesting.’ But people are also starting to say, ‘What’s in return for me?'”
This downward trend spilled over into global markets, with the pan-European Stoxx 600 index ending slightly lower, while MSCI’s broadest index of Asia-Pacific stocks outside Japan
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> The stock fell 0.7%, marking its second straight day of declines.
S&P 500 e-mini futures
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Nasdaq e-mini futures rose 0.1%.
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It was stable.
Japanese stocks rose, with the Nikkei Stock Average rising 0.8%.
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Challenging times for speculative traders
Cryptocurrencies have so far managed to halt a brutal slide after being wiped out on Thursday, part of a larger selloff that has wiped $2 trillion of value from the market since October.
Bitcoin rose 2.9% to $64,916.60 after earlier falling as much as 4.9% to a low of $60,008.52, while Ethereum was last up 1.64% to $1,877.51, partially reversing a 5.1% drop.
Precious metals are also trying to recover from a sharp decline, with silver falling 3.3% to $73.57 after falling as much as 10%. Gold was last up 1.6% at $4,846.88, having previously fallen 2.4%.
“This is just a massive risk-off,” Cincotta said, noting that cryptocurrencies often come under pressure when this kind of sentiment emerges.
“And I think what’s interesting is that given the tremendous volatility that we’ve seen, assets like precious metals that were previously thought of as safe havens are now actually not considered safe havens,” she added.
Bet on the Fed’s response
On the US monetary policy front, markets are starting to bet that the Federal Reserve is more likely to cut interest rates at its next meeting, although most still expect rates to remain unchanged.
Federal funds futures are pricing in a 20.7% chance of a 25 basis point rate cut in the two-day meeting ending March 18, compared with a 9.4% chance a day earlier, according to CME Group’s FedWatch tool.
The U.S. dollar index, which measures the dollar’s strength against a basket of six currencies, was last down 0.1% to 97.836.
In energy markets, Brent crude rose 1% to $68.26.
