AI spending concerns trigger sharp tech declines this week
This week @ 1500 – Friday 6th Feb – London.
Markets:
- FTSE 100 rose 0.96% this week to 10,320, driven by a strong start to February and gains in the heavyweight mining and banking sectors.
- S&P 500 fell 2.05% this week to 6,844, driven by a sharp sell-off in large-cap technology stocks following disappointing capital expenditure guidance.
- Nasdaq Composite fell 3.92% this week to 22,541, driven by concerns over the scale of AI infrastructure spending and its impact on near-term profitability.
- Euro Stoxx 50 rose 1.05% this week to 6,010, driven by robust performance in financials and defensive sectors, despite volatility in US tech.
Bonds:
- UK 10-year gilt yields rose 7 bps this week to 4.55%, reflecting the Bank of England’s decision to maintain interest rates and a cautious outlook on inflation persistence.
- US 10-year Treasury yields fell 8 bps this week to 4.19%, reflecting a flight to safety as equity markets retreated and data suggested cooling labour demand.
Commodities:
- Brent crude fell 3.03% this week to $68.26, as concerns over global demand growth outweighed geopolitical tensions.
- Gold rose 4.68% this week to $4,870, as investors sought hedges against equity market volatility.
- Copper fell 0.55% this week to $5.79, driven by mixed industrial data from major importing economies.
FX:
- GBP/USD rose 0.51% this week to 1.36, as the dollar softened following cautious commentary from US policymakers.
- EUR/GBP fell 0.12% this week to 0.868, as sterling found support after the Bank of England’s 5-4 vote to hold rates.
Macro:
- Bank of England held interest rates at 3.75% on 5th February in a close 5-4 vote, with four members voting for a 25 basis point cut. The MPC noted inflation should return to 2% target from April but remain cautious given sticky wage growth.
- European Central Bank held interest rates at 2.0% on 5th February, maintaining a data-dependent approach. ECB President Lagarde emphasised uncertainty from global trade policy and geopolitical tensions while noting euro zone inflation below the 2% target at 1.7% in January.
- US labour market showed signs of weakening with job openings falling to 6.54 million in December (lowest since April 2020) and January job cuts reaching 108,400, the highest for the month since 2009. Initial jobless claims rose to 231,000.
- Iran and US commenced nuclear talks in Oman on Friday aimed at reducing Middle East tensions, though significant disagreements remain over the scope of negotiations.
Companies:
- Alphabet Inc: Reported a revenue beat driven by cloud growth, but shares faced pressure after disclosing an annual capex outlook of up to $185 billion for 2026.
- Amazon: Shares slid as the company announced plans to invest $200 billion in AI infrastructure, leading to investor concerns over margin compression.
- Beazley Plc: Shares performed strongly following positive sentiment regarding disciplined underwriting and capacity in the speciality insurance market.
What we will be keeping an eye on next week…
w/c 9th February
- Macro: US January jobs report (rescheduled to 11th Feb); UK Q4 GDP preliminary data; US CPI inflation data (rescheduled to 13th Feb).
- Earnings: BP, Coca-Cola, and Cisco Systems are scheduled to report quarterly results.
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
Important Information
This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.