On Monday, August 5, the value of shares of European technology companies and local firms operating in the semiconductor manufacturing industry showed a drop.
The mentioned downward trajectory of securities is associated with concerns that such a negative scenario as a recession will materialize in the space of the economic system of the United States. Currently, the volatility of financial markets is currently a global tendency. In this case, there is an example of what can be described as economic globalization. Against the background of closer and more interconnected trade, production, and financial relations between countries, their kind of interdependence is increasing. Problems in the United States economy, which is the largest in the world and is characterized by a gross domestic product worth $26.8 trillion as of the second quarter of 2024, may significantly affect similar systems in other countries.
Currently, financial markets are opting for so-called safe-haven assets. Top-performing stocks become less in demand.
The STOXX tech index fell 4.1%. This result turned out to be the worst indicator among the industry indices for the STOXX 600 region, which lost about 3%.
Market sentiment has been significantly affected by information that Nvidia may delay the debut of an artificial intelligence chip. The media reported that the reasons for this decision may be design flaws. According to preliminary data, the debut may take place three or more months later than the originally planned date. The setback could affect technology giants such as Meta Platforms, Google and Microsoft. These companies have already ordered chips with a total value of several tens of billions of dollars. This was reported by the media, referring to people who help manufacture microcircuits and server hardware for Nvidia. In March, the company presented the Blackwell chip series. The new product succeeded Nvidia’s earlier flagship AI microcircuit, the Grace Hopper Superchip, which was designed to accelerate the process of functioning of generative artificial intelligence apps.
On Friday, August 2, the technology index has already lost 6%. This dynamic was recorded after the data on job growth and factory data in the United States turned out to be worse than preliminary expectations. Disappointing Intel earnings information was also an impact factor.
The value of shares of ASM International, a Netherlands-based manufacturer of equipment for the semiconductor-producing industry, fell by 12% on Monday. It is worth noting that on Friday the corresponding indicator decreased by 13%. The value of shares of ASML, another Netherlandish manufacturer of equipment for making chips, fell by 4% on Monday.
Securities of BE Semiconductor, a developer and manufacturer of semiconductor equipment based in the Netherlands, declined by 5% on August 5. Shares of STMicroelectronic, a Swiss microelectronics producer that makes various semiconductor components, showed a similar decrease.
Against the background of the negative situation in the markets in the United States, according to media reports, Wall Street has increased pressure on the Federal Reserve System to force the US financial regulator to cut interest rates. Proponents of the need to ease monetary policy reckon that appropriate action is appropriate in the context of heavy selling on the stock market and disappointing employment data.
Traders are betting that by the end of the current year, the central bank of the United States will adhere to an aggressive strategy. In their opinion, in September, the Fed will cut interest rates by 0.5% in September. They also expect that the corresponding action in the context of the monetary policy of the central bank of the United States will be repeated in November. Moreover, traders are betting that the Fed will lower the cost of borrowing by 0.25% in December.
JPMorgan chief economist Michael Feroli says that the number of arguments in favor of cutting interest rates is currently increasing before the next policy meeting of the central bank of the United States, which is scheduled for September 17-18. The expert said that there are good reasons to start easing monetary policy in August. Michael Feroli expects the Fed to lower borrowing costs by 50 basis points in September. Also, according to the expert, the central bank of the United States will make a similar decision in November.
Wilmer Stith, bond portfolio manager for Wilmington Trust, does not expect the Fed to start cutting interest rates outside of the regular scheduled meeting. According to the expert, the Fed will not commit such actions, so as not to spook investors. The traditional practice of the financial regulator of the United States provides for the adoption of such measures during an extreme crisis.
