October Market Slide Hits Tech Firms and Emerging Economies
Technology shares, emerging-market equities and high-yield bonds fell in October, while the developed-market stock index rose 1.0%. The major central banks held interest rates steady.
Global financial markets were uneven in October: shares of technology companies and emerging economies fell, while the developed-market equity index gained 1.0% in euro terms over the month. A market review published by the Latvian business daily Dienas Bizness shows that investor sentiment was shaped by concerns over funding for the artificial intelligence industry as well as political developments in individual countries.
Central banks pause
The central banks of the United States, the eurozone and Japan left interest rates unchanged in October, after raising them together the previous month following a long pause. Both long- and short-term rates declined over the month. Pressure nevertheless grew in the riskier segments of the bond market.
French government bond prices fell amid protests in which people demanded more funding for education and voiced frustration over housing availability. France's public debt exceeds 119% of gross domestic product, leaving very limited fiscal room. High-yield bond prices also declined on worries about the AI sector's financing needs. Borrowing costs for CoreWeave topped 15% in mid-month, whereas investors had been content with a 9% yield on its bonds this summer. The high-yield euro bond index lost 1.1% over the month, while the broad euro bond index rose 1.6%.
Equity markets
Shares of South Korean technology firms Samsung and SK Hynix dropped 17% and 20% respectively, and the country's KOSPI index hit its lowest level of the year in mid-October. Alphabet, Google's parent company, reported revenue growth and earnings per share below expectations; its stock fell 12.6% in a single day, the largest one-day drop in the company's history, according to Bloomberg data.
Indonesia's stock index declined by about 16% after index provider MSCI said it was reviewing the country's classification and could move it from the developed-market category to a separate market category. That could reduce passive investment flows into Indonesian equities. In Brazil, after left-leaning President Luiz Inácio Lula da Silva won the election and began a fourth term, the IBOVESPA index lost 9.9% over the month. The emerging-market equity index fell 6.4% in euro terms.
Gold fell about 4% in euro terms and Bitcoin about 7%. Both remain below their levels at the start of the year by a similar margin.
