AI rout spreads from Wall Street to Asia as US payrolls loom

Wall Street reversed hard on Thursday. The S&P 500 closed 4.36% lower at 7,353.73, the Nasdaq Composite 5.52% lower at 24,315.00 and the Dow 3.44% lower at 51,523.06, leaving the Nasdaq 12.29% below its 52-week high. US cash is shut, so futures are the only live read, and they are split: S&P 500 futures are down 0.17%, Nasdaq 100 futures up 0.63%.

Asia took the hit today. The Kospi ended 6.02% lower, the Nikkei 5.96% lower at 57,434.77 and Taiwan 4.51% lower. China and Hong Kong have held up better, with the Hang Seng down 1.17% and Shanghai down 1.10%. Europe's Thursday losses looked mild by comparison: the FTSE 100 and DAX each closed 0.43% lower, while the CAC 40 finished 0.34% higher.

The spark was political. Wednesday's rally treated the Democrats' midterm sweep partly as a route to an earlier end to the Iran war. By Thursday, investors were focused on the risk of tighter AI rules and curbs on data-centre construction, which could slow the capital spending behind chipmakers and power suppliers. AMD lost 17.26%, Micron 17.46% and Sandisk 22.26%.

Policy risk alone does not obviously justify a move of that size, and there is no single clean explanation. Analysts said existing orders were unlikely to be affected. Nomura's Charlie McElligott pointed instead to hedge funds taking profits before year-end, and Vanda Research described forced selling by systematic and leveraged funds. Long-running worries about AI valuations and costly data-centre borrowing left the trade vulnerable.

The chip-heavy markets of Seoul, Tokyo and Taipei were hit hardest. South Korea temporarily waived a collateral rule for brokerages to limit forced selling, which happens when falling prices trigger margin calls. Beijing's pledge to prevent systemic risk, and bargain hunting, cushioned mainland shares. Europe's fall had a separate strand: Rheinmetall dropped 16.14% after cutting its 2026 sales forecast for the second time in three months. Brent is up 1.27% at $99.54 as uncertainty over Iran persists.

Fear has returned, mostly in equities. The VIX closed at 28.18, up from 16.61, while the MOVE index of bond volatility rose a far milder 4.31% to 97.92. Technology led, but the damage was broad: all eleven US sector funds fell, from technology's 8.00% to communication services' 0.59%, and our own US count shows 5,123 decliners against 1,025 advancers. Havens are working selectively. The 10-year Treasury yield fell 5.7 basis points to 4.837% as buyers moved into bonds, and the dollar index is up 0.36% at 101.912, but gold is down 1.31% at $4,059.60.

UK house prices disappointed at 07:00. The Lloyds index fell 0.6% in October against a consensus of a 0.1% rise, and the annual rate dropped to -1.2% from -0.1%, against -0.3% expected. That follows Thursday's 25 basis point Bank of England rise, its first since 2023, which Governor Andrew Bailey said should not be seen as the start of an inevitable sequence. German industrial output beat forecasts, rising 0.7% in September against an expected flat reading, though August's gain was revised down to 1% from 2%.

Eurozone retail sales follow at 10:00 GMT. The main event is the US October jobs report at 13:30 GMT, with payrolls expected to rise about 65,000 after September's 29,000 and unemployment seen at 4.2%. Canada's jobs data lands at the same time. Preliminary University of Michigan sentiment follows at 15:00 GMT, with consensus at 48.

IAG reported third-quarter operating profit before exceptional items of €1,726m this morning, below the roughly €1.81bn expected and €2,053m a year earlier as jet fuel costs bit, but it kept its full-year margin guidance of at least 12%; London has yet to deliver its verdict. On Thursday, AppLovin rose 31.04% against the tape after beating revenue and profit forecasts, showing that strong numbers could still be rewarded. Veracyte fell 54.30% after trimming the top of its 2026 revenue outlook.