On Wednesday (October 16th), global stock markets fell due to poor performance reports from European giant LVMH and technology company ASML, which dampened market sentiment. Inflation data in the UK opened the door for the Bank of England to further ease policy, causing the British pound to plummet in the short term.
Investors are increasingly likely to sell off stocks due to poor performance, and Wednesday's European market was no exception. European stock markets fell, with weak performance in the luxury goods industry exacerbating negative sentiment about the profit prospects of the semiconductor industry.
The reason for the global chain reaction of declines is found!
The Euro Stoxx 600 index fell by 0.3%, with chip manufacturing giant ASML Holdings continuing to decline after issuing a profit warning on Tuesday. ASML's customers include TSMC and Samsung, and on Tuesday the company expressed pessimism about its sales expectations for 2025, stating that the semiconductor market weakness, except for artificial intelligence, is lasting longer than expected. ASML's stock price suffered its largest drop in nearly 30 years on Tuesday, and fell another 5% in early trading on Wednesday.
Meanwhile, LVMH and Salvatore Ferragamo SpA led luxury stock declines, with both companies' stock prices falling by as much as 7%.
U.S. stock index futures were largely unchanged. S&P 500 and Nasdaq futures were flat, indicating that Wall Street might open stable later in the day, despite major indices falling on Tuesday.
ASML's decline had a domino effect on the entire industry, leading to a loss of more than $420 billion in market value for U.S.-listed chip manufacturers and the largest Asian stock index. NVIDIA's stock price fell nearly 5% on Tuesday, after the stock had reached an all-time high earlier this week.
Despite the weakness of companies like NVIDIA and ASML affecting the entire market, Peter Fitzgerald, Chief Investment Officer of Macro and Multi-Asset at Aviva Investors, noted that the continued strong demand for artificial intelligence and support from central bank policies have provided momentum for the market.
"We believe there is still enough fundamental strength in the market," he said, "especially as central banks are on the path of easing policies, which provides broad support for the market."
Michael Brown, a market strategist at Pepperstone, said that the market's decline may provide investors with a good buying opportunity. He stated that if bank performance can be a reliable indicator for the entire earnings season, then solid earnings growth and resilient economic growth should continue to drive the market higher, especially with the strong easing policies of the Federal Reserve providing additional confidence.As the stock market approaches historical highs and valuations appear to be high, analysts say there is room for significant market volatility, especially in the current political context. Matt Simpson, a senior market analyst at City Index, said that as the November 5th U.S. election approaches, investors may become increasingly nervous and want to take profits when the market bubble is high.
The British pound plummeted
In the foreign exchange market, the British pound broke through $1.30, falling by 0.6% to $1.2990, the lowest level since August 20. Data showed that consumer prices in the UK in September rose by only 1.7% year-on-year, lower than economists' expectations, consolidating market expectations that the Bank of England will cut interest rates at least once this year, or even twice.
The US dollar index rose slightly after climbing to its highest level in about two months, as former US President Donald Trump defended his proposal to raise tariffs on foreign imports.
At present, the core factor affecting the strength of the US dollar is the expectation of the Federal Reserve's monetary policy. Traders expect a 46 basis point rate cut this year, while less than a month ago, after the Federal Reserve cut rates by half a percentage point, the market expected a rate cut of nearly 80 basis points. As a result, the US dollar has risen sharply in recent weeks, with the US dollar index reaching 103.24, close to its highest level since early August.
The yen to US dollar exchange rate is about 149 yen, after Bank of Japan director Seiji Adachi emphasized the need to gradually raise the benchmark interest rate.
The euro is hovering near a two-month low, with the latest trading at $1.08815, as investors focus on Thursday's European Central Bank policy meeting, which is expected to cut rates again.
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