Trader angst pivots from inflation to growth as tech rout deepens — SkimNews
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- Nasdaq suffered its deepest one-day drop since the April 2025 'Liberation Day' drubbing, wiping out trillions in market value as the tech-led selloff broadened.
- U.S. Democrats swept the midterm elections, adding fears of greater AI scrutiny and curbs on data-centre construction to concerns about the huge cost of the AI build-out.
- Federal Reserve December rate-hike pricing fell to roughly 70%, down from more than 80% last week; MUFG's Lee Hardman said tighter U.S. financial conditions could matter more than the payroll report in deciding December policy.
- European Central Bank December hike odds fell to roughly 60% from 75% last week, while traders priced a 58% chance that the Bank of Japan leaves rates unchanged next month, versus 42% odds of a hike.
- South Korea is particularly exposed to an AI downturn: Citi's Jin-Wook Kim expects 25-basis-point Bank of Korea hikes in November and February, but said a sharp drop in memory prices and semiconductor exports could prompt a pause after November.
- IMF forecasts global growth at 3.1% this year and says a steep drop in AI investment could slash global GDP by 1.1% by 2028 in one downside scenario.
- Euro zone inflation is at a three-year high of 4%, above the ECB's 2% target, while policymakers remain focused on determining how long elevated energy prices from the Middle East conflict will last.
Why it matters: For the Federal Reserve, a roughly 70% December-hike probability, down from over 80%, coincides with U.S. two-year yields tracking a second straight weekly fall of 10 basis points. Falling asset values reverse the wealth effects supporting consumer-led growth, making tighter financial conditions a more immediate constraint on the central bank's inflation fight.
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