Global stock markets slammed into reverse yesterday following a string of warnings that an artificial intelligence-driven bubble may be about to burst.
Having hit a record high of 9548 on Wednesday, the FTSE 100 index followed up a 0.4 per cent dip on Thursday with a slide of 0.9 per cent yesterday to end the week at 9427.47.
It was the biggest sell-off since mid-September and came after the Bank of England and the International Monetary Fund (IMF) warned buoyant stock markets are at risk of a major correction.
The losses in London were echoed in New York where the S&P 500 fell 2.4 per cent in early trading, the Nasdaq lost 3.1 per cent and the Dow Jones Industrial Average shed 1.7 per cent.
Problematic: Donald Trump has ramped up his trade war with China by threatening a ‘massive increase’ in tariffs on goods from the country
The ructions came as Donald Trump ramped up his trade war with China by threatening a ‘massive increase’ in tariffs on goods from the country. The US President said he saw ‘no reason’ to meet his Chinese counterpart Xi Jinping – putting scheduled talks in South Korea before the end of the month in jeopardy – citing Beijing’s ‘hostile’ export controls on rare-earth minerals.
‘It’s a bolt from the blue from Trump,’ said Mike Brown, an analyst at trading platform Pepperstone. The sell-off stoked fears that a crash is looming at the end of a week which saw gold and stock markets scale new highs in the face of a string of warnings that excitement over AI has created a bubble. Steve Sosnick, chief market analyst at Interactive Broker, said: ‘The President’s comments are not, obviously, helpful for the market.
‘We finally got through the worst of the tariff concerns and now we find ourselves once again faced with another round of them – and the tone of his comments was certainly quite aggressive.’
The IMF, whose annual meetings start in Washington on Monday, this week issued a stark warning about the risks facing the global economy.
With its World Uncertainty Index hitting a record high, managing director Kristalina Georgieva declared: ‘Buckle up – uncertainty is the new normal and it is here to stay.’
Meanwhile, a report by the Bank of England warned: ‘The risk of a sharp market correction has increased.’
Jamie Dimon, boss of Wall Street bank JP Morgan, added to anxiety levels with alerts that a serious correction could happen in the next six months.
‘I am far more worried about that than others,’ he said.
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