Wall Street Faces Tech-Led Sell-Off Amid Geopolitical Concerns
On Tuesday, Wall Street experienced a significant tech-led sell-off, driven by geopolitical instability following Iran’s missile attack on Israel and a large-scale strike by U.S. port workers. Stocks linked to military and energy sectors rose, while shipping and retail sectors struggled due to U.S. port closures. Investors moved toward safer assets, boosting the U.S. dollar, gold, and Treasuries, with market volatility hitting a one-month high.
European stocks also declined, with major indices such as the Euro Stoxx 50 and Stoxx 600 falling 0.4%, led by banks amid the growing geopolitical risks.
Asian Markets Drop Following Wall Street’s Decline
On Wednesday, Asian shares mirrored the sell-off seen in the U.S. after Iran’s missile strike on Israel, raising fears of a broader regional conflict. Japan’s Nikkei dropped 1.5%, South Korea’s KOSPI fell 1.3%, and Australia’s index saw a 0.3% decline. Meanwhile, MSCI’s Asia-Pacific index fell 0.5%. Hong Kong remained closed for a holiday, and Taiwan suspended trading due to a typhoon.
Cautious Outlook for European Markets
European equity markets are expected to open cautiously today as the Middle East tensions weigh on investor sentiment. Concerns about geopolitical instability could overshadow economic indicators scheduled for release later this week. U.S. equity futures also pointed lower, with investors eagerly awaiting labour market data, which could influence future monetary policy.
Oil Prices Rise Amid Supply Concerns
Oil prices surged as fears grew over potential supply disruptions from the Middle East following Iran’s attack on Israel. As a key OPEC member, Iran’s involvement raised concerns about oil supply. Markets are closely monitoring the OPEC+ review, which could result in output adjustments to offset any disruptions. Meanwhile, U.S. oil stockpile data showed mixed results.
U.S. Port Workers Strike Impacts Supply Chains
In a major disruption, dockworkers on the U.S. East and Gulf Coasts launched their first large-scale strike in nearly five decades, halting operations at 36 ports. This action is expected to cost the U.S. economy $5 billion daily, as supply chain disruptions, inflation, and job losses loom. The strike was sparked by disputes over wages and job protections.
U.S. Manufacturing PMI Stays in Contraction
September’s ISM Manufacturing PMI remained in contraction territory at 47.2%, slightly below expectations of 47.4% but up from 46.8% in July. This marks the sixth consecutive month below the neutral line of 50, signaling ongoing challenges for the sector. The prices index also fell below 50 for the first time this year, indicating easing inflation pressures.
Eurozone Inflation Falls to 1.8%
Eurozone inflation dropped to 1.8% in September, marking the lowest level since April 2021. This is down from 2.2% in August and below the European Central Bank’s (ECB) target of 2%. Core inflation also eased to 2.7%. The ECB expects inflation to rise again later in 2024.
Nike Withdraws Revenue Forecast Amid Sales Decline
Nike withdrew its annual revenue forecast as new CEO Elliott Hill prepares to take the helm. The company is facing declining sales and weak online traffic, with shares falling 6% after disappointing quarterly results. Nike expects an 8-10% sales decline next quarter and plans to rebuild wholesale partnerships under Hill’s leadership.
Boeing Considers $10 Billion Share Sale
Boeing is considering raising at least $10 billion by selling new shares, according to Bloomberg, though any equity raise is unlikely for at least a month. The company faces financial pressure from slumping 737 MAX production, a worker strike, and a heavy debt load of $60 billion. Analysts expect Boeing to raise $10-12 billion by the end of 2024.
Apple Cuts iPhone 16 Production Orders
Barclays analysts reported that Apple reduced its iPhone 16 production orders by 3 million units, reflecting weaker-than-expected demand. Early sales data indicated a 15% year-on-year decline, with shorter wait times compared to previous years. Citi also lowered its iPhone forecasts for 2024 and 2025, pointing to consumer hesitancy ahead of new feature launches.
China’s EV Market Sees Strong Growth
China’s electric vehicle (EV) market continues to expand, with Li Auto, XPeng, and NIO reporting robust delivery growth in September and Q3 2024. Li Auto led the pack with a 48.9% year-on-year increase in deliveries, while XPeng and NIO also saw strong gains.
Outlook for Big Tech Faces Risks Amid Rising Capital Expenditures
Barclays analysts warned that rising capital expenditures among Big Tech firms, particularly driven by AI investments, could signal an earnings downturn. While AI investments are expanding, they also increase costs, posing risks to established business segments and valuations.
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