Shares in Europe and Asia tumbled on Wednesday following a drop on Wall Street a day earlier – amid a selloff led by technology firms – mainly due to growing concerns over the sustainability of ever-growing AI investments.
But benchmarks in Asia recovered much of the ground lost earlier in the day, when Tokyo’s Nikkei fell nearly 5%. It recovered to close 2.5% lower, at 50,212.27.
In early European trading, Germany's DAX gave up 0.7% to 23,777.85, while the CAC 40 in Paris shed 0.4% to 8,039.32. Britain's FTSE 100 edged 0.1% lower, to 9,707.18.
The future for the S&P 500 slipped 0.1%, while that for the Dow Jones Industrial Average edged 0.1% higher.
The spillover from Wall Street was evident. Shares in energy and tech giant SoftBank Group sank 10% on jitters over its investments in artificial intelligence. Computer chip maker Tokyo Electron dropped 4.1%, while stock in Advantest Corp., a maker of semiconductor testing equipment, lost 6%.
Toyota Motor Corp. lost 3.7%. The company reported a 7% decline in its profit for the April-September period, but raised its earnings forecast for the year, despite U.S. President Donald Trump's higher tariffs on imports of autos and auto parts.
South Korea's Kospi declined 2.9% to 4,004.42 as Samsung Electronics shed 4.1%. SK Hynix, which had logged major gains thanks to plans to develop artificial intelligence with chip maker Nvidia, lost 1.2%.
Chinese markets wavered between gains and losses. The Shanghai Composite index recovered from modest earlier losses to edge 0.2% higher, to 3,969.25. Hong Kong's Hang Seng declined 0.1% to 25,935.41.
Investors apparently took fright from the heavy selling of high-tech related shares overnight on Wall Street.
The technology sector has been driving gains this year, and huge values for companies including Nvidia and Microsoft give them outsized influence over the broader market’s direction.
The price of gold, which tends to climb in times of uncertainty, jumped 0.8% to $3,990.90 an ounce.
"The rally that began in April is finally feeling its age. What we are seeing today wasn’t just a dip; it was a full-scale reality check," Stephen Innes of SPI Asset Management said in a commentary.
"This wasn’t the usual intraday shake-out. It felt more like the oxygen suddenly thinning at the top of a mountain that everyone assumed had no summit," he said.
Palantir Technologies, which creates software platforms for data, fell 7.9% despite reporting results that beat analysts’ forecasts. Chipmaker Nvidia also reversed course from a day earlier, falling 4%, while Microsoft fell 0.5%.
Other sectors also declined, leading the S&P 500 to give up 1.2%. The index is still up more than 15% for the year.
The Dow Jones Industrial Average dropped 0.5% and the technology-heavy Nasdaq fell 2%.
Wall Street remains focused on corporate earnings. Roughly three out of every four companies within the S&P 500 have reported their latest results, and most have been better than analysts expected.
Several big companies will report their latest financial results later this week, including McDonald's, Expedia Group and Qualcomm.
The latest round of corporate profit reports and forecasts has taken on more significance for Wall Street due to the U.S. government shutdown. Investors and economists are trying to gauge the health and direction of the U.S. economy without the latest economic updates on inflation and employment.
Outside of earnings, Tesla fell 5.1% after Norway’s sovereign wealth fund, one of the electric car maker’s biggest investors, said Tuesday that it will vote against a proposed compensation package that could pay CEO Elon Musk as much as $1 trillion over a decade.
In other dealings early Wednesday, U.S. benchmark crude oil lost 14 cents to $60.42 per barrel. Brent crude, the international standard, shed 14 cents to $64.29 per barrel.
The dollar fell to 153.53 Japanese yen from 153.66 yen. The euro rose to $1.1495 from $1.1482.
