British shares fell on Wednesday morning, following declines in Asian and US markets amid growing concerns about the world’s largest economy.
Investors are now focused on the US jobs report due on Friday, as the data shows US manufacturing activity remains weak.
US chipmaker Nvidia was particularly hard hit, with its shares falling nearly 10% as optimism about the artificial intelligence (AI) boom faded.
Despite the sharp drop, Nvidia’s stock is still worth twice what it was a year ago.
The FTSE 100 index, which is made up of the biggest companies on the London Stock Exchange, was down 0.55% by lunchtime, with major European indexes also falling: Germany’s DAX was down 1.41%, France’s CAC 40 was down almost 1% and Spain’s IBEX was down 0.51%.
Market participants are now trying to predict how the US central bank, the Federal Reserve, will react when it meets next week to decide interest rate policy.
“Growth concerns are dominating market action,” Julia Lee of FTSE Russell told the BBC.
In New York on Tuesday, the S&P 500 Index closed down more than 2%, while the tech-heavy Nasdaq fell more than 3%.
Nasdaq-listed Nvidia fell 9.5%, losing $279bn (£212.9bn) in its stock market valuation.
But in the long term, Nvidia’s stock could be worth nine times what it will be in November 2022, when the launch of ChatGPT sparked renewed interest in AI and demand for Nvidia’s chips soared.
Shares of other U.S. tech giants including Alphabet, Apple and Microsoft also fell sharply on Tuesday.
Japan’s Nikkei stock average ended Wednesday trading down 4.2%, while South Korea’s KOSPI fell more than 3% and Hong Kong’s Hang Seng Index dropped 1.1%.
Share prices of major Asian technology companies, including TSMC, Samsung Electronics, SK Hynix and Tokyo Electron, fell sharply.
Asian markets haven’t performed as well as they did last year, with the Shanghai and Hong Kong stock indexes falling over the past 12 months, but Japan’s Nikkei average is up 12% over the past year.
“Concerns over global economic growth appear to be hitting exporters in the region particularly hard,” Lee added.
Investors will await next week’s U.S. interest rate decision, as well as Friday’s U.S. jobs market report, which will provide further indications on the direction of the U.S. economy.
Sweta Ramachandran, a fund manager at Artemis Investment Management in London, said Tuesday’s drop in U.S. stocks was a sign that investors were beginning to doubt whether the Federal Reserve would make significant interest rate cuts.
She told the BBC that Nvidia’s share price fall was a result of “expectations catching up with reality” for the AI giant.
“[Nvidia]reported earnings last week, signaling a natural and expected slowdown in growth, with the company now expecting 80% growth in the third quarter compared to 122% growth in the second quarter,” she said.
The drop in stock prices could also be a response to reports that the Department of Justice has issued a subpoena to the company seeking evidence related to antitrust issues, she added.
The Justice Department declined to comment.
