LONDON, – Global stock markets declined on Wednesday, pressured by disappointing earnings from European giants LVMH and tech firm ASML, while the U.S. dollar strengthened as investors adjusted expectations for a more gradual decline in U.S. interest rates.
Investor sentiment turned sour following earnings misses, with European stocks particularly hit. ASML, a key supplier to semiconductor giants such as TSMC and Samsung, issued a downbeat sales forecast for 2025, citing a prolonged slump in the semiconductor market beyond artificial intelligence. The company’s shares dropped by the most in nearly three decades on Tuesday and fell an additional 2.5% on Wednesday.
Meanwhile, luxury goods leader LVMH—often considered a barometer for Chinese consumer demand—reported weaker-than-expected sales for the third quarter. The disappointing results come amid fading optimism over China’s recent economic stimulus measures. As a result, LVMH shares plunged, dragging down France’s CAC 40 index by 0.5% and the broader STOXX 600 by 0.2%.
Adding to the pressure on the chip sector was a report from Bloomberg suggesting that U.S. officials are contemplating a cap on export licences for AI chips to certain countries. This development weighed heavily on Asian markets, with Japan’s Nikkei 225, Taiwan’s TAIEX, and South Korea’s KOSPI all posting declines of 1.7%, 1.2%, and 0.6%, respectively. Nvidia shares saw a modest pre-market recovery of 0.5% after dropping over 5% in after-hours trading.
In the U.S., futures for the S&P 500 and Nasdaq were flat, indicating a potential stabilisation after declines in Tuesday’s session. Pepperstone’s market strategist, Michael Brown, suggested that recent dips could present buying opportunities. “If banks continue to show strong earnings growth alongside resilient economic data, it could support further market gains,” he noted.
Economic Data and Rising Dollar
On the macroeconomic front, data from the UK showed a sharper-than-expected slowdown in inflation for the previous month. This has bolstered expectations that the Bank of England could implement rate cuts, possibly twice before year-end. The British pound slipped below $1.30 for the first time in two months, while the FTSE 100 index rose 0.7% as UK stocks received a boost from the rate outlook.
In the U.S., the outlook for Federal Reserve policy remains central to the dollar’s strength. Traders are now expecting around 46 basis points of rate cuts by the end of the year, down from nearly 80 basis points anticipated a month ago. This shift followed the Fed’s recent half-point rate cut. The dollar index, which measures the U.S. currency against six major counterparts, reached 103.23—its highest level since early August.
The euro also remained under pressure, trading near two-month lows at $1.08945 ahead of the European Central Bank’s upcoming policy meeting, where another rate cut is widely expected.
Oil Prices Extend Decline Amid Middle East Uncertainty
Oil markets also experienced volatility, with prices extending a sharp 5% drop from the previous session. The ongoing conflict in the Middle East has added uncertainty to global supply dynamics, contributing to the downturn. Brent crude futures fell 0.6% to $73.78 per barrel, while U.S. crude futures decreased by 0.7% to $70.12.
Analysts expect further fluctuations in the markets as geopolitical risks intersect with economic concerns. With stocks hovering near record highs and valuations appearing stretched, many investors remain cautious ahead of the upcoming U.S. presidential election on November 5. Matt Simpson, senior market analyst at City Index, suggested that investors are increasingly questioning their exposure to market risks, stating, “As we approach November, profit-taking at these elevated levels seems likely.”
The combination of disappointing corporate earnings, a strong dollar, and geopolitical tensions has created a challenging environment for global markets. As central banks in the U.S., UK, and Europe continue to adjust their policy outlooks, market participants are closely watching for signs of stability or further turbulence in the weeks ahead.
Source: Reuters