Tech selloff

Tech selloff – Asian stocks fell, and European equity futures edged lower as investors considered whether the recent rally in artificial intelligence (AI) stocks still has room to grow.

Netherlands-based ASML’s warning had a dampening effect on the increasing rally in chip stocks. ASML’s peers, including Tokyo Electron Ltd. and Taiwan Semiconductor Manufacturing Co., saw declines during Asian trading hours. In the US, Nvidia Corp. lost 4.7%, indicating a slowdown for some of the biggest players in the industry.

The combined market value losses for an index of US-traded chipmakers and the largest Asian stocks amounted to more than $420 billion.

In Europe, ASML’s shares experienced their biggest drop since 1998 after the manufacturer of the world’s most advanced chipmaking machines reduced its outlook due to weakness in areas beyond AI. It lowered the top end of its guidance range for 2025 total net sales to €35 billion ($38 billion) from €40 billion.

UK inflation falls than expected

The UK inflation rate fell below the Bank of England’s (BOE) 2% target for the first time in 3 1/2 years, indicating a potential for a second interest rate cut next month. In September, consumer prices rose 1.7% compared to a year earlier, down from the previous 2.2% pace, as reported by the Office for National Statistics on Wednesday.

This figure was lower than the 1.9% expected by economists and the 2.1% forecast by the BOE in August. The decrease was due to cheaper air fares, lower petrol prices, and a reduction in services inflation, which stood at 4.9%, below the median estimate of 5.2%.

GBPUSD at 1.30

The British pound is under downward pressure after today’s inflation data, dropping to as low as 1.30 at the time of this report. This is the lowest level since mid-July. All eyes are on the UK budget, which is expected to be released by the end of this month.

At the moment, the technical indicators are still far from being oversold. This suggests that the downward pressure could continue. If the price breaks below the psychological support level of 1.30, it could lead to further declines towards 1.2970, followed by 1.2930. This is because the market is currently anticipating a faster pace of interest rate cuts by the Bank of England, in response to the inflation data.

Gold above $2670

Gold prices surged overnight, breaking through several resistance levels and reaching as high as $2675. This increase is attributed to rising tensions between Iran and Israel. Reports indicated that a major fire broke out in one of Iran’s refineries yesterday, but it remains unconfirmed whether the incident was caused by an airstrike or was simply an accident.

Meanwhile, the technical indicators are improving. However, the time/price method suggests that as long as Gold continues to trade below its record high, the possibility of another leg lower is more likely. 

NZD under pressure

New Zealand’s annual inflation rate dropped significantly in the third quarter, reaching the central bank’s target range for the first time in over three years.

The inflation rate dropped to 2.2% from 3.3% in the second quarter, according to Statistics New Zealand in Wellington. This result was in line with economists’ expectations, although the Reserve Bank had predicted 2.3%. Consumer prices rose by 0.6% from three months earlier, which was slightly below the economists’ estimate of 0.7%.

As a result, the New Zealand dollar (NZD) decreased in value overall, with the NZDUSD pair dropping to its lowest level since mid-August, nearing the psychological support level of 0.6000. The technical indicators indicate that the currency is not yet oversold, which could lead to further declines in the coming days. However, if the pair stabilizes above the current level around 0.6060, it might gain momentum and move towards 0.61 in the short term.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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