Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy - where the only thing more volatile than oil prices is investor sentiment.
Stock markets across Asia-Pacific started the day in full retreat mode, as investors juggled fears of rising US interest rates, renewed Middle East conflict, and the unsettling possibility that the AI boom might actually require making money someday. South Korea's KOSPI index briefly dropped nearly 9%, forcing a trading halt - presumably so traders could go collect themselves. Japan's Nikkei 225 fell 3.8%, just to keep things consistent.
The sell-off followed a painful Friday on Wall Street, where the S&P 500 dropped 2.64% after a surprisingly strong US employment report convinced traders that the next move in interest rates will be up, not down. Because nothing says 'strong economy' like making borrowing more expensive.
Technology stocks have been taking a beating on fears that the AI race is becoming a contest of who can raise and spend the most money, as ChatGPT and Anthropic prepare to float on the stock market. Apparently, investors are starting to wonder if infinite spending on chatbots is actually a sustainable business model.
Then Iran launched strikes on Israel over attacks on Hezbollah targets in Beirut, adding geopolitical spice to an already bubbling pot. But just as markets were bracing for the worst, Tehran announced the 'end of its military operations' against Israel - a move that sent oil prices rapidly dropping back from earlier highs. Brent crude, which hit $98 a barrel earlier, is now up just 1.75% at $94.58. Crisis averted? For now.
The oil price did briefly spike again after reports of explosions in central Tehran, following Israel's IDF announcement that dozens of air force fighter jets had 'completed an extensive strike' on Iranian 'strategic defence systems'. But by then, markets had apparently decided that geopolitical whiplash was just part of the Tuesday experience.
European stock markets shook off their earlier losses, with the pan-European Stoxx 600 index turning slightly higher. The UK's FTSE 100 pushed into positive territory, up 22 points (0.2%) at 10,390. Government bond prices recovered too, pulling down yields on UK, US, and eurozone debt. Even Donald Trump got in on the action, demanding both sides 'immediately stop shooting' - perhaps the most bipartisan statement he's made in years.
Weapons maker BAE Systems rose 1.45%, because nothing says 'peace' like a bump in defense stocks.
Meanwhile, in Blackpool, the GMB union's annual congress heard that driverless taxis could cost 300,000 drivers their jobs. The congress called on the government to introduce laws protecting taxi and private hire drivers from job losses. Ali Haydor, a private hire driver and GMB delegate, delivered the obvious-but-still-worth-saying line: 'The gig economy firms present driverless taxis as progress... but progress for whom?' UK company Wayve plans to offer driverless vehicles to paying passengers in London 'in the next couple of months' - so drivers might want to update their CVs.
Over in Italy, a fresh battle is brewing over the future of the world's oldest bank: Monte dei Paschi di Siena (MPS), dating back to 1472. Intesa Sanpaolo tabled an unsolicited €30.6bn bid, which would create the euro zone's second biggest banking group by market cap (€126bn), behind Spain's Banco Santander (€155bn). But hours earlier, Banco BPM had sent MPS a letter suggesting a merger to create a 'new national champion' and Italy's second largest bank, leapfrogging Unicredit with a market cap of around €50bn. Intesa's bid involves breaking up MPS, selling 635 branches and the brand to insurer Unipol Assicurazioni, while keeping Mediobanca and its 13% stake in Generali. All eyes are now on MPS bosses' response, which could transform Italy's banking landscape - or just give everyone a headache.
In Copenhagen, shares in drugmaker Zealand Pharma dropped 25% after trial data showed its obesity drug survodutide had worse side effects and higher dropout rates than rivals. Nearly one in four patients taking the highest 6-milligram dose stopped treatment due to side effects, with one in five dropping out specifically because of gastrointestinal problems. Apparently, the side effects were worse than the condition.
Despite the chaos, some remain optimistic. Mohit Kumar, an economist at Jefferies, said 'We are not worried about an AI bubble,' noting that capex spending as a proportion of free cash flow remains well below 1999 - 2000 levels. Nvidia CEO Jensen Huang called the selloff a buying opportunity, saying 'We're at the beginning of it, and whatever happened to the stock market, you should be very happy because now you can buy at a discount.' He made these remarks while drinking beer and eating fried chicken with SK Group chairman Chey Tae-Won in Seoul - because nothing says 'confidence in AI infrastructure' like a convivial poultry-based dinner.
US tech stocks may recover some losses today, with the Nasdaq Composite futures pointing to a 0.6% gain. Derren Nathan of Hargreaves Lansdown noted that SpaceX's potential IPO - possibly the largest in history - is teed up for Friday, with UK retail investors being offered unprecedented access. Because if there's one thing markets need right now, it's more hype.
Ingredients developer Tate & Lyle became the latest UK company to fall to an overseas takeover, agreeing to be bought by US rival Ingredion in a £2.7bn deal. Once famous for sugar refining, Tate & Lyle now makes sweeteners, fibres, and stabilisers - because sugar is very much out of fashion, thanks to rising health awareness and weight loss jabs. Shares rose 12% on the news.
Charu Chanana, chief investment strategist at Saxo, summed up the AI selloff with five reasons: AI crowding, top-heavy leadership, expectations too high, AI funding questions, and geopolitical risk. In other words, when everyone piles into the same trade, a small disappointment can lead to a much bigger unwind. Who knew?
As markets continue their rollercoaster ride, one thing is clear: the only certainty is uncertainty. And maybe some fried chicken.