Global stocks retreat as Fed outlook and AI valuations weigh

US stocks reversed early gains to close at one-month lows on Thursday, weighed down by expectations of higher-for-longer interest rates and renewed scrutiny of stretched AI valuations. The Nasdaq 100, S&P 500, and Dow all declined, while delayed BLS employment data — the final release before the Fed’s December meeting — showed stronger-than-expected job growth, reinforcing expectations that policymakers will hold rates steady. On the corporate front, Nvidia gave back early gains after initially rallying on strong earnings, reiterating strong AI-infrastructure demand but noting its $100 billion deal with OpenAI is not yet assured. AMD, Micron, and Oracle also retreated, while Walmart rose on strong results and raised guidance.

European stocks closed sharply higher, lifted by the initial boost from Nvidia’s earnings. Optimism around AI demand drove gains for data centre-linked firms, including Siemens, Schneider, and ASML. BNP Paribas led banking advances after announcing a new buyback plan and raising its CET1 target to 13% by 2027, while Novartis slipped despite raising sales targets for two major cancer drugs.

In Asia, mainland Chinese stocks fell to multi-week lows as tech and AI-linked shares joined the global selloff. Pressure from Wall Street was compounded by domestic concerns, with Beijing considering measures to support the housing market, including mortgage subsidies for first-time buyers, larger income-tax rebates, and lower transaction costs. If adopted, the plan would be China’s latest effort to curb a prolonged property slump that has eroded household wealth, slowed consumption, and strained banks. Bloomberg noted the package has been under discussion since Q3, though timing and final details remain uncertain.

In South Africa, the rand was little changed, trading around R17.23/$ after the South African Reserve Bank cut its key repo rate to 6.75%, resuming policy easing. The unanimous decision signals a shift toward a more accommodative stance to support economic recovery amid a more favourable inflation outlook. Last week, South Africa set a new 3% inflation target, replacing the 3%-6% range that had been in place for 25 years. Inflation forecasts for 2025 and 2026 were slightly lowered, while growth expectations for this year were raised. The JSE followed global weakness, with the All-Share Index ending lower as miners and tech-linked stocks saw selling pressure.

On the commodities front, oil prices edged higher as a sharper-than-expected draw in US crude stocks offset concerns that a potential US-led peace framework in the Russia-Ukraine conflict could increase Russian supply, while gold held steady around $4 070 per ounce as subdued hopes for a quick Fed rate cut and signs of a resilient US labour market limited safe-haven demand.