Rolling coverage of the latest economic and financial news
9m agoChancellor Healey pledges to 'stay the path' at IMF meeting
12m agoProtests against the IMF and World Bank
23m agoIntroduction: Chip stock sell-off deepens ahead of UK GDP report
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The sell-off in chip stocks is deepening today, worrying investors as market await the latest UK GDP report.
Signs of rising inflation in the US are driving concerns about the risk of interest rate hikes, and AI-linked stocks are bearing the brunt.
In South Korea today, the KOSPI share index has plunged by over 8%, extending its recent losses. Chip giants Samsung Electronics (-9%) and SK Hynix (-10.5%) are leading the rout.
Japan’s Nikkei 225 is sliding too – it’s down by 4.5% in late trading.
This follows a drop on Wall Street on Wednesday, where the S&P 500 index fell by 1.1% and the Nasdaq Composite lost 1.9%.
That includes an 11% plunge in Dell’s shares, which CNBC blames on mounting concerns that enterprise spending on artificial intelligence won’t justify the AI buildout.
The news yesterday that US inflation has jumped to 3.7% has alarmed traders, as it makes it more likely that the US Federal Reserve will raise interest rates soon – possibly even at the end of this month.
Chris Weston, analyst at brokerage Pepperstone, says signs that US inflation pressures are spreading worries investors:
Further evidence of right-tail inflation risk in the US has reinforced the higher-for-longer rates narrative, with sellers emerging across risk assets and interest rate-sensitive equities coming under renewed pressure. The breadth of price pressures across the CPI basket has been particularly concerning, challenging a market desperately in need of evidence of disinflation.
Further evidence of right-tail inflation risk in the US has reinforced the higher-for-longer rates narrative, with sellers emerging across risk assets and interest rate-sensitive equities coming under renewed pressure.
The breadth of price pressures across the CPI basket has been particularly concerning, challenging a market desperately in need of evidence of disinflation.
These inflation pressures will also worry policymakers at the IMF’s Annual Meeting in Bangkok, which continues today (of which more shortly…)
We’ll soon learn how the UK economy performed in August, too. The latest GDP data, due at 7am, is expected to show a fall of 0.1% in the month, as growth fizzled out after a strong July.
The agenda
7am BST: UK GDP report for August
10am BST: Eurozone industrial production report for August
1.30pm BST: US initial jobless claims data
1.30pm BST: US PPI index of producer price inflation in September
“Markets have just had an incredibly tumultuous 24 hours, as a strong US CPI print was then followed up with mounting fears around the AI trade”, reports Jim Reid, strategist at Deutsche Bank.
Moreover, there’s been a huge selloff in Asia overnight, with the KOSPI (-7.04%) and the Nikkei (-5.08%) both slumping, and the KOSPI even saw a circuit breaker triggered earlier given the scale of the declines.
Reid points out that the cost of insuring the debt of some AI companies, such as CoreWeave, has been rising – a sign that investors are nervous about leverage and borrowing levels.
The chancellor, John Healey, has arrived in Bangkok for the IMF/World Bank meetings and spoke briefly as he entered the conference centre this morning.
He welcomed the IMF’s endorsement of the UK’s fiscal policy -the Fund’s managing director Kristalina Georgieva urged the government to “stay the course” on Wednesday.
“I’m pleased the IMF here in Bangkok have backed our economic plans in London. They say the UK stands out on growth despite the deep economic shocks that are affecting worldwide at present. They say Britain stands out on our plans to get to grips with the big borrowing costs by previous governments. They also say it’s important to stay the path, and I will follow that as I prepare my budget in two weeks’ time.”
“I’m pleased the IMF here in Bangkok have backed our economic plans in London. They say the UK stands out on growth despite the deep economic shocks that are affecting worldwide at present.
They say Britain stands out on our plans to get to grips with the big borrowing costs by previous governments. They also say it’s important to stay the path, and I will follow that as I prepare my budget in two weeks’ time.”
He said he would be urging fellow G7 member-countries to continue backing Ukraine; and announced £20m of UK support - alongside France and the US - for critical repairs in Chernobyl.
Healey attended a meeting of G20 central bankers and finance ministers today, and was also due to hold discussions with Georgieva, and have bilateral meetings with the Australian, Qatari and Saudi finance ministers, and the South Korean deputy prime minister.
Heather Stewart is the Guardian’s economic editor, attending the annual meeting of the International Monetary Fund and the Wold Bank in Thailand this week.
Good morning from Bangkok, where the route from my hotel to the vast Queen Sikirit conference centre where the IMF/World Bank meetings are being held was blocked by this small but noisy protest by the People’s Network Against World Bank-IMF, with their friendly-looking World Bank pig.
They’re apparently a coalition of environmental and civil society groups who oppose IMF/Bank-backed development projects as costly and opaque.
Local media have reported scuffles, but at the time I saw them, the numerous police lined up appeared bored, rather than tense.
