UK shares fell on Wednesday morning, following declines in Asian and US markets, as concerns about the world’s largest economy intensified.
Data revealed that US manufacturing activity remains sluggish, with investors now turning their attention to the US jobs report due on Friday.
American chip giant Nvidia was particularly affected, plunging nearly 10% as optimism around the boom in artificial intelligence (AI) waned.
Despite this sharp decline, Nvidia’s shares are still worth twice their value from a year ago.
The FTSE 100 index, which includes the largest companies on the London Stock Exchange, dropped 0.76% in early trading, with major European indexes also in the red.
Market analysts are now speculating on how the Federal Reserve, the US central bank, will respond during its upcoming meeting to decide on interest rate policy next week.
“Growth concerns are dominating market moves,” Julia Lee at FTSE Russell told the BBC.
On Tuesday in New York, the S&P 500 index closed more than 2% lower, while the technology-heavy Nasdaq dropped over 3%.
Nvidia, listed on the Nasdaq, fell by 9.5%, reducing its stock market valuation by $279 billion (£212.9 billion).
Despite this recent decline, Nvidia’s shares are still valued at nine times their price in November 2022, when the launch of ChatGPT ignited a surge in interest in AI and boosted demand for Nvidia’s chips.
Other major US tech companies, including Alphabet, Apple, and Microsoft, also experienced significant declines in their shares on Tuesday.
On Wednesday morning, Japan’s Nikkei 225 dropped by 4.4%, South Korea’s Kospi fell by 3%, and Hong Kong’s Hang Seng index decreased by 1.3%.
Major Asian technology firms, such as TSMC, Samsung Electronics, SK Hynix, and Tokyo Electron, also saw sharp declines.
Asian markets have generally underperformed over the past year, with the Shanghai and Hong Kong indexes lower over the twelve months. However, Japan’s Nikkei has risen by 12% over the same period.
“Concerns around global growth look to be hitting exporting countries in the region particularly hard,” Ms Lee added.
As well as next week’s interest rate decision in the US, investors will be waiting for Friday’s US jobs market report, to provide further signs on the direction the US economy is taking.
Swetha Ramachandran, fund manager for Artemis Investment Management in London, said Tuesday’s US share falls were a sign that investors were beginning to doubt the Federal Reserve would make a large cut in interest rates.
Nvidia’s slide was a matter of “expectations catching up with reality” for the AI giant, she told the BBC.
“[Nvidia] did report results last week where it alluded to a natural and expected deceleration in growth: from having delivered 122% growth in the second quarter it expects to deliver 80% growth in the third quarter,” she said.
The fall might also be a reaction to reports that the US Department of Justice had issued a subpoena, requiring the firm to give evidence over anti-trust issues, she added.
The Department of Justice declined to comment.