What a week it’s been for the markets. Global stocks have had their worst week since April as the heat around AI stocks begins to flare up.
On Thursday, the Nasdaq posted its biggest green-to-red move since President Donald Trump’s “Emancipation Day” shocked stocks in April. And it resonated all over the world, Stocks 600 Germany hits new low in 1 month dachshund Asian stocks ended the week in deep red, falling to levels not seen since June.
What does such a volatile week for stocks and other asset classes mean for the trading week ahead?
Much of the discussion around the CNBC International Desk this week centered on some of the year’s most popular stocks and what caused investors to become more cautious about certain asset classes that have been mobbed since the Trump administration returned to the White House.
In other words, what the market wanted to know is which tail is wagging the dog.
Robert Nickelsburg Getty Images
Tail 1: Fears about AI
Tail 2: Concerns about cryptocurrencies
It’s the “revenge of the old economy.” This is the view of Jeff Currie, Carlyle’s chief strategy officer, who told CNBC’s Juliana Tatelbaum in London that there is a connection between AI jitters and the big moves seen in the crypto markets this week.
“The people who own big tech companies also own cryptocurrencies. They sell cryptocurrencies to cover the losses of big tech companies, and what follows is a violent down cycle,” he said.
Tail 3: Lazy data
The data, delayed by the U.S. government shutdown, did little to clarify the Fed’s next steps, as a rise in September’s unemployment rate and other downward revisions spooked investors.
The FOMC’s latest minutes also suggest it intends to forego a rate cut in December, with Standard Chartered’s Stephen Englander writing in a recent note: “We have moved the December rate cut to the first quarter, possibly January.” He added that “hawkish sentiment appears to be more deliberate than dovish sentiment.”
Next week, we can expect to hear a variety of voices from the ECB, including ECB President Christine Lagarde, Executive Director Frank Elderson, and Executive Director Piero Cipollone, who will be speaking at various events in Europe. Lagarde on Friday called on Europe to move “from mere resilience to real strength.”
Tail 4: Fiscal sentiment
The overall volatility in the stock market may have provided some air support to British Prime Minister Rachel Reeves as she counts down the days until Wednesday’s budget announcement. Although touted as the fiscal event of the year, the bond market has had its share of ups and downs so far. Ian King will give the details live from Westminster, while CNBC’s UK Exchange Newsletter details how Reeves plans to tackle the £30bn financial hole.
Britain’s Reeves paints a confusing picture as pressure mounts from all sides
The simple answer is that all of this is most likely wagging the tail at the market dog, but with so many market forces at play, perhaps the safest bet is that volatility is expected to continue into next week’s trading.
This week’s global events:
Monday: prosus Income; ECB’s Lagarde speaks
Tuesday: alibaba income, easyjet income
Wednesday: US GDP data, US CPI data
Thursday: European consumer confidence data
Friday: French GDP data, German inflation data
