Stocks fall as Big Tech gloom combines with pre-election jitters

LONDON: Global shares fell on Thursday after Facebook owner Meta Platforms and Microsoft warned of the rising costs of artificial intelligence, and evidence of strong US economic growth helped support the dollar.

Big Tech’s warnings have raised concerns among investors that heavy spending on artificial intelligence will take longer to pay off than many hope. The mood turned cautious as Amazon and Apple reported later in the day.

Among currencies, the dollar fell from three-month highs against the yen after the Bank of Japan kept interest rates steady as expected but struck a hawkish tone, leading some analysts to raise the possibility of a rate hike in December.

Investors were also remaining cautious ahead of Friday’s U.S. nonfarm payrolls data, next Tuesday’s presidential election and Thursday’s Federal Reserve policy decision.

Thursday’s data showed that the core personal consumption expenditures (PCE) index, the Fed’s preferred measure of inflation, rose 2.7 percent in September, matching the increase in August and compared to expectations for a 2.6 percent increase.

A separate report showed that first-week jobless claims fell more than expected in the final week, pointing to the health of the labor market.

S&P 500 futures and Nasdaq futures were down 0.7 percent on the day, indicating a weaker start to trading on Wall Street.

“The numbers are unlikely to be a game-changer for financial markets, with participants for now squarely focused on next Tuesday’s presidential election, even if the woes of the October jobs report show up in tomorrow’s data,” said Pepperstone strategist Michael Brown.

At the company level, shares of Microsoft and Meta, which are up 15 percent and 67 percent respectively so far this year, are down 1-2 percent in premarket trading.

“There are a lot of excuses not to increase your exposure in the market right now, and tech gains have peaked,” said David Morrison, market strategist at Trade Nation.

Nvidia, the poster child for artificial intelligence, became the last of the “Magnificent 7” megacap tech companies to report earnings in nearly three weeks. Tesla reported this last week, and Alphabet followed on Tuesday.

FRAGILE NERVES

In Europe, the STOXX 600 hit a seven-week low on a busy day for earnings as shares in French lender BNP Paribas fell following results and technology shares such as ASML and SAP offset a recovery in the energy and banking sector.

Meanwhile, in the final stretch of the US presidential election race, although financial markets and some betting platforms are tilting towards Trump’s victory, opinion polls still show Republican Donald Trump and Democrat Kamala Harris neck-and-neck.

The dollar index fell 0.17 percent to around 104, just below Tuesday’s nearly three-month high. The US currency was the biggest loser against the yen, falling 0.5 percent to 152.695, still within range of this week’s high of 153.885.

The dollar is expected to rise about 6.5 percent against the yen in October as political uncertainty in Japan after the coalition government lost its majority in parliamentary elections over the weekend potentially hinders the BOJ’s efforts to normalize monetary policy.

“This supports our forecast that the BoJ will raise interest rates earlier than current market expectations, although we have postponed the timing of our next rate hike forecast from December to January in light of recent political instability in Japan,” MUFG currency strategist Lee said. Hardman said.

“If the yen weakens sharply after the US election, a final rate hike this year cannot be completely ruled out,” he said.

Gold hit a record high of $2,790.15 an ounce before reaching $2,775 again, while oil rose 0.8 percent to $73.16 a barrel after weekly data showed an unexpected decline in fuel stocks that offered some reassurance on energy demand. .

(Additional reporting by Kevin Buckland in Tokyo and Wayne Cole in Sydney; Editing by Toby Chopra, Kirsten Donovan)