Rolling coverage of the latest economic and financial news
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.
As storm Austen hits these shores this morning, clouds kept darkening for markets yesterday, as the wobbles of recent weeks all collided at once. First, there was mounting stress around France, with the Franco-German 10yr spread (+14.8bps) seeing its biggest daily widening since the initial pandemic turmoil in March 2020.
Second, AI fears continued to gather pace, with the Philly semiconductor index (-6.72%) falling to its lowest level since July, which dragged down equities more broadly. And third, the latest geopolitical fears meant oil prices kept rising as well, with Brent crude (+4.00%) hitting a 5-month high of $113.17/bbl.
…In the midst of all these market pressures, an interesting theme was the flight to US Treasuries, which returned to its traditional risk-off role in periods of turmoil. In fact, the 10yr yield fell -16.6bps to 4.95%.
Moreover, that came despite some strong US data, demonstrating how the financial stress was weighing on sentiment rather than the fundamentals. For instance, the weekly initial jobless claims fell to a 3-month low of 194k in the week ending October 17 (vs. 200k expected). And in turn, that pushed the smoother 4-week moving average to its lowest since September 2022, back when the unemployment rate was just 3.5%.
Given the more than 50% retreat in memory chipmakers’ share prices from their peaks, we could now argue that their exponential rise was a bubble, and that the bubble has burst.
These memory chip companies continue to benefit from strong AI-related demand, and they’re trading at very low forward earnings multiples: Samsung and SK Hynix at around 3–4× — yes, 3–4 times! Alas, buyers are nowhere to be found.
The drop in retail sales in September and sharp fall in consumer confidence in October raises the risk that the economy’s recent run of resilience might be coming to an end.
At least part of the drop in retail sales in September can be attributed to warm weather dampening demand for winter clothing, which might reverse in October.
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
