European markets down and Asian chipmakers tumble in global stock sell-off

Jim Reid, analyst at Deutsche Bank, said there is talk of whether we are “on the verge of an equity correction”.

The last 24 hours have brought a clear risk-off move, as concerns over lofty tech valuations have hit investor sentiment.

Markets compounded these losses in the early hours of Asian trading but have been rallying back in the couple of hours prior to going to print with US futures clawing back towards flat with the Kospi rallying back a couple of percentage points from early -5% plus losses.

On Wall Street yesterday, the S&P 500 closed down 1.17%, losing ground because of sharp losses among tech stocks, and there was a big slump for Palantir (-7.94%) after its earnings the previous day.

Reid added:

Whilst the moves were only one day’s selloff, the market narrative saw a discernible shift, with a growing chorus discussing whether we might be on the verge of an equity correction. That speculation has gathered pace over the last month in particular, mainly because the Magnificent 7 has diverged from the rest of the S&P 500, which has revived questions about how concentrated this equity market now is. Indeed, whilst the Mag 7 have been advancing in recent weeks, the equal-weighted S&P 500 actually fell in October for the first time in 6 months.

Yesterday’s decline for Palantir (-7.94%) was seen as emblematic of this shift, particularly given they’d actually raised their revenue outlook the previous day. But given their share price had quadrupled in the last year, that’s set the bar incredibly high for any earnings releases. In fact, the Magnificent 7 (-2.28%) led the declines yesterday, with Nvidia itself down by a larger -3.96% as some of those top-performing stocks came under scrutiny.