Tech firms led a plunge across Asian markets on Wednesday after a rout on Wall Street fuelled by a collapse in chip titan Nvidia and disappointing data on US factory activity that revived recession fears.
The sight of investors running to the hills sparked memories of the brief but tumultuous sell-off at the start of August that was partly fuelled by a big miss on US jobs creation.
On the local front the rand breached the R18 to the US dollar mark on Wednesday morning, and was trading at R18.01 at 8:30am. The local currency has weakened this week, breaching the $17,80 mark on Monday after hitting a 13-month high of $17.60 last Friday due to optimism about South Africa’s economic prospects and expectations of US Fed rate cuts.
Tech firms plunge
All three leading indexes in New York ended sharply lower on Tuesday, with the Nasdaq the main casualty - diving more than three percent - as traders dumped big-name tech firms including Apple, Alphabet and Amazon.
But the biggest loser was AI chip leader Nvidia, which tanked 9.5 percent - shedding almost $280 billion (R5.04 trillion) of its value - on fears that the surge in firms linked to artificial intelligence may have run too far.
That came amid a warning that spending on all things AI by companies in recent years would need to be justified unless demand outside of the tech realm picked up and that it could take some time to begin paying off.
Adding to the pain, it emerged after US markets closed that US authorities had issued Nvidia and other firms subpoenas as it probes claims they violated antitrust laws.
That led Asian markets deep into the red.
Tokyo and Taipei each dived more than three percent, while Seoul was more than two percent lower. Hong Kong, Sydney, Singapore and Manila gave back more than one percent.
All eyes on the US economy
Worries about the US economy burst back onto the scene after figures showed a marginal improvement in factory activity in August but it still remained in contraction for a fifth successive month.
The figures come days before a closely watched report on non-farm payrolls, which could have a big impact on Federal Reserve officials' decision-making going into next week's policy meeting.
The bank is expected to cut interest rates but the debate surrounds how big it will go, with most tipping a 25-basis-point reduction but a below-forecast reading seen boosting the chances of a 50-point move.
While weaker readings on jobs and the economy have in the recent past been seen as positive owing to the chances of the Fed cutting rates, analysts warned that the bad news was now being taken as a worrying sign for the economy.
"A 50-basis-point cut might not be the market's best friend if it shows up alongside signs of labour market weakness," said independent analyst Stephen Innes.
"In that scenario, those cuts could be viewed less as a soft landing cushion and more as a last-ditch effort to steer clear of a full-blown economic crash."
Oil extended losses after the previous day's heavy selling sparked by demand worries linked to a weak Chinese economy and questions over the US outlook, while OPEC's consideration of output hikes added to the pain.
Key figures around 4am SA time
- Tokyo - Nikkei 225: DOWN 3.4 percent at 37,378.35
- Hong Kong - Hang Seng Index: DOWN 1.6 percent at 17,370.29
- Shanghai - Composite: DOWN 0.7 percent at 2,784.85
- Dollar/yen: DOWN at 145.40 yen from 145.46 yen on Tuesday
- Euro/dollar: UP at $1.1050 from $1.1047
- Pound/dollar: DOWN at $1.3105 from $1.3111
- Euro/pound: UP at 84.32 pence from 84.17 pence
- West Texas Intermediate: DOWN 0.6 percent at $69.89 per barrel
- Brent North Sea Crude: DOWN 0.6 percent at $73.34 per barrel
- New York - Dow: DOWN 1.5 percent at 40,936.93 (close)
- New York - S&P 500: DOWN 2.1 percent at 5,528.93 (close)
- New York - Nasdaq Composite: DOWN 3.3 percent at 17,136.30 (close)
- London - FTSE 100: DOWN 0.8 percent at 8,298.46 (close)
AFP