Tech sell-off and oil near $112 push European and US stocks lower

Europe and Wall Street lower

Share prices fell on Thursday, 22 October, as technology stocks sold off and oil climbed. In London the FTSE 100 closed down 27.85 points, or 0.3%, at 10,725.03, while the FTSE 250 lost 0.9% to finish at 24,211.71. Paris's CAC 40 ended 1.4% lower and Frankfurt's DAX 40 dropped 1.1%. By the London close the S&P 500 was down 1.1% and the Nasdaq Composite had slid 2.0%, after Nasdaq 100 futures had been trading 1.7% lower earlier in the session. The Dow Jones Industrial Average was off 0.3% at the same point, as the decline spread across Wall Street.

Doubts over AI spending

Technology names bore the brunt of the decline. Meta Platforms shares dropped 5.6% in New York even though third-quarter revenue beat expectations. Finance chief Susan Li said the computing demands of its Muse AI agent would require heavy investment to grow the user base, and she expected total serving costs to rise. Lam Research fell 10% and IBM slipped 1.1%, while Tesla dropped 0.9% after its earnings. Nvidia chief executive Jensen Huang told CNBC that demand for neocloud services was exceptionally strong, yet scarce capital was holding back growth.

Trade Nation analyst David Morrison called the move a worrying reversal in investor sentiment after Wednesday's tech-led gains. He said the fallout for chip stocks and other AI-linked shares was concerning.

Not only does it show that upside momentum has waned significantly, but that intermediate support levels are creaking dangerously.

Santiago Mateo, head of equity at CaixaBank AM, said investors now want clearer proof that spending pays off.

Investors want evidence that investment is translating into stronger growth, better monetization and ultimately earnings.

Oil and the Iran conflict

Brent crude was quoted at $111.18 a barrel at the London equity close, and the New York Times put it at about $112 after a 3% gain, its highest level since May. West Texas Intermediate neared $100 a barrel. Oil had reached as high as $120 a barrel since the US-Israeli war on Iran began nearly eight months ago. Before the war, around 20% of the world's oil moved through the Strait of Hormuz, and flows are now running at about 75% of prewar levels, according to Kpler. The New York Times reported, citing sources, that the United States and Israel are planning new strikes on Iran after the US midterm elections in November. On Wednesday evening, 21 October, Donald Trump told reporters that Washington was not negotiating with Tehran. Separately, the United States ordered some diplomats to leave Saudi Arabia over threats from Houthi militants. The AAA motor club put the average US gasoline price at $4.27 a gallon on Thursday, up 43% since the war began, while diesel averaged $6.31 a gallon, up 68% over the same period.

Bonds, China and housing

The premium investors demand on French 10-year yields over German counterparts reached 175 basis points, the highest since 2011, according to Bloomberg. The CSI 300 closed 1.8% lower on Thursday and was 20% below its June high, with Hong Kong-listed Chinese and tech stocks also falling. Hermès International dropped more than 7% after reporting no sales growth in the region that includes China. Treasuries rallied as investors sought havens, pushing 10-year yields down seven basis points. In the United States, PulteGroup and NVR both reported quarterly earnings below estimates, as high mortgage rates and global turmoil crimped sales and orders fell.