On Wednesday, the FTSE 100 index remained around the flatline, while European stocks faced a decline as the global stock sell-off persisted. Analysts suggest that some investors are cashing out, particularly from AI-related stocks, following the record highs of US stock indices last week.
Executives from Goldman Sachs and Morgan Stanley indicate a market correction may be on the horizon within the next one to two years. Meanwhile, investor Michael Burry, known for betting against the housing market before the 2008 financial crisis, has reportedly taken significant short positions against Palantir and Nvidia.
Deutsche Bank analyst Jim Reid noted a noticeable shift in market sentiment. He mentioned that despite Wednesday’s sell-off being only a single day, discussions around a potential equity correction are increasing, particularly as the “Magnificent 7” stocks diverge significantly from the S&P 500.
The so-called “Magnificent 7,” which includes heavyweights like Nvidia, Microsoft, and Tesla, has experienced a 45% surge in the past year due to excitement around artificial intelligence. In contrast, the S&P 500, when equally weighted, has only seen a 5% increase during the same period.
Concurrently, the US government shutdown has now lasted 36 days, marking a new record, surpassing the previous 35 days during Donald Trump’s administration. Analysts estimate that the ongoing shutdown costs the US economy between $10 billion to $30 billion weekly, adversely affecting federal employees.
London’s benchmark FTSE 100 index held steady in early afternoon trading, primarily due to its limited exposure to tech stocks. In the broader European market, Germany’s DAX and France’s CAC saw declines of 0.5% and 0.2%, respectively, while the pan-European STOXX 600 fell by 0.3%.
As Wall Street prepared for a lower opening, futures for the S&P 500, Dow, and Nasdaq were all down, while the pound saw a slight increase of 0.1% against the US dollar, trading at 1.3041.
