Global stock markets fell sharply, led by declines in U.S. technology stocks, causing significant drops in domestic markets. As uncertainties surrounding artificial intelligence (AI) investments spread, rising international oil prices and the potential for further interest rate hikes in major economies have heightened financial market anxieties.
According to the International Financial Center, the U.S. Standard & Poor's (S&P) 500 index fell 4.36% on November 5, closing at 7,353.7. The Nasdaq index dropped 5.5% to 24,315. This decline in the S&P 500 is the largest since April of last year, while the Nasdaq has entered a correction phase, falling more than 10% from its previous peak.
Weakness in AI-related technology stocks was a primary driver of the market decline. The Philadelphia Semiconductor Index plummeted nearly 12% in just one day. Concerns have arisen that regulations on data center construction may tighten following the U.S. midterm elections, increasing uncertainty about investment prospects for AI-related companies. Notably, a pledge to delay approvals for new construction in Texas, which accounts for 25-30% of the nation’s total data center capacity, has raised alarms about potential investment disruptions in the sector.
The sharp drop in U.S. stocks also impacted the domestic market. On the same day, the KOSPI index fell 5.28% to 5,383.8. The Nikkei 225 index in Japan decreased by 1.79%, while the European Stoxx 600 index dropped 0.38%.
In addition to stock market instability, rising international oil prices and the possibility of tightening monetary policy in major economies are also seen as burdens on financial markets. Brent crude oil rose 3.88% to $98.29 per barrel. If this upward trend in oil prices continues, inflationary pressures could increase through energy costs.
Comments from central bank officials in major economies have also been hawkish. Beth Hammack, president of the Cleveland Federal Reserve Bank, stated that inflation is unacceptably high and additional interest rate hikes are necessary. Thomas Barkin, president of the Richmond Federal Reserve Bank, indicated that given inflation is above target levels, a gradual pace of rate increases would be appropriate.
However, the preference for safe assets due to the stock market decline has led to a decrease in U.S. Treasury yields. The yield on the 10-year Treasury note fell by 5 basis points to 4.83%. This shift is attributed to a flight to safety, with funds moving into relatively secure Treasury bonds.
* This article has been translated by AI.
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