Global stock indices sharply fell last week as the technology sector came under pressure again due to fears that the stock prices of these companies are too high after strong growth in recent years. On Wall Street, the Dow Jones index slid 1.9 percent to 46,245 points, while the S&P 500 dropped 2 percent to 6,602 points, and the Nasdaq index fell 2.7 percent to 22,273 points. The sharp decline in indices is primarily a result of pressure on the technology sector.
Resilient Labor Market
This sector has been growing strongly for a long time, thanks to the euphoria surrounding the development of artificial intelligence, but in recent weeks, investors are concerned about high prices of technology stocks and massive investments in this sector, raising questions about which investments will pay off.
Consequently, investors were not reassured by better-than-expected quarterly business results from Nvidia, the world’s largest producer of artificial intelligence chips and the largest company by market capitalization. Indeed, immediately after the results were announced, Nvidia’s stock price jumped five percent, but by the end of the day, it lost all those gains and fell about three percent.
The largest global stock exchange was also affected by the employment report in the U.S., which showed that the number of employed people increased more than analysts expected in September. This indicates that the situation in the U.S. labor market, and indeed in the entire economy, is not as bad as previously thought. As a result, expectations that the U.S. central bank will further reduce interest rates in December have diminished. Until recently, it was estimated that there was about a 90 percent chance that the Fed would do this, but now those chances are significantly lower.
European stock prices also sharply fell last week. The London FTSE index slid 1.6 percent to 9,539 points, while the Frankfurt DAX plummeted 3.3 percent to 23,091 points, and the Paris CAC fell 3.3 percent to 7,982 points.
On global markets, the value of the dollar against a basket of currencies rose nearly one percent last week, after two weeks of decline, reaching its highest level in five and a half months. The dollar index, which shows the value of the U.S. dollar against six major world currencies, strengthened by 0.9 percent last week to 100.19 points. Meanwhile, the dollar strengthened by 0.9 percent against the European currency, causing the euro exchange rate to slide to 1.1515 dollars.
Yen Under Pressure
The U.S. currency also strengthened against the Japanese yen by 1.2 percent, bringing the dollar price to 156.40 yen. The dollar exchange rate rose the most against the yen last week, reaching 157.90 yen at one point, the highest level in 10 months. The yen came under pressure as the government of new Prime Minister Sanae Takaichi introduced a stimulus package aimed at curbing inflation and strengthening the economy, worth 135.5 billion dollars. Additionally, it is estimated that the Japanese central bank will not rush to raise interest rates despite rising inflation, which has also contributed to the yen’s weakening. However, on Friday, the dollar exchange rate against the yen slipped from its highest level in 10 months as the Japanese finance minister threatened intervention if large fluctuations in the exchange rate and speculation aimed at weakening the Japanese currency continue.
