Global stocks slide as AI fears grow; UK retail sales and consumer confidence fall

A fresh wave of selling hit artificial intelligence stocks on Friday 23 October, sending US markets to their weakest sessions in months as investors grew increasingly anxious about the sustainability of AI-fuelled returns.

The blue-chip S&P 500 fell 1.2%, its worst performance since July, while the tech-heavy Nasdaq dropped 2.6%, its biggest fall since June. The Philadelphia semiconductor index slid 6.7%, also its worst day since June. Japan and South Korea, whose markets have been buoyed by exposure to the AI investment boom, fell before recovering to trade broadly flat.

Oil and bonds add to the pressure

Deutsche Bank's Jim Reid said several worries collided at once, including stress around France — the Franco-German 10-year spread widened by 14.8 basis points, its biggest daily move since the initial pandemic turmoil in March 2020 — and geopolitical fears that lifted oil prices. Brent crude rose 4% to a five-month high of $113.17 a barrel and was up another 1% on Friday morning at $114.

The 10-year US Treasury yield fell 16.6 basis points to 4.95%, its largest daily decline since August 2024, as investors sought safe havens despite stronger US data. Weekly initial jobless claims fell to a three-month low of 194,000 in the week ending 17 October, against expectations of 200,000.

Ipek Ozkardeskaya of Swissquote said memory chipmakers' share prices had retreated more than 50% from their peaks, arguing their exponential rise was a bubble that has now burst. Samsung and SK Hynix trade at around three to four times forward earnings, yet buyers are nowhere to be found, she said. Microsoft, Google, Amazon and Sandisk are all due to report results next week.

British retail sales fall

UK retail sales fell 0.4% in September, official figures showed, a steeper drop than the 0.1% decline expected. An unseasonably warm start to autumn weighed on online clothing vendors, and supermarkets also saw volumes fall.

Thomas Pugh, chief economist at RSM UK, said the fall in sales and a sharp drop in consumer confidence in October raised the risk that the economy's recent run of resilience is coming to an end. Warm weather dampened demand for winter clothing, which could reverse, but retailers also reported lower footfall and customers cutting back, suggesting cost-of-living pressures are biting, he said.

GfK's consumer confidence index fell 11 points in October to -24, its sharpest monthly drop since July 2016 outside the pandemic; the largest ever monthly fall was 25 points in March 2020. GfK's Neil Bellamy cited relentless cost-of-living pressures and unresolved regional conflicts contributing to domestic inflation, now at 3.5%.

Capital Economics' Paul Dales said fuel sales rose 2.2% month-on-month as households filled up before prices rose further, while clothing store sales fell 0.9% and supermarket sales 0.4%. Total sales still rose 0.7% over the third quarter.

PwC UK's head of retail, Jacqueline Windsor, said fashion retailers fared worst, with petrol spending more than 30% higher than a year earlier diverting money from other purchases.

Source: The Guardian Business.