German government bond yields, the benchmark in the euro zone, are on track to record their largest weekly decline since late September, as investors flock to safe assets, following a renewed wave of selling in US technology stocks, and a decline in market bets on the European Central Bank raising interest rates.
The wave of selling in shares of global technology companies deepened on Friday, amid fears that the Democrats' victory in the US midterm elections would lead to tightening regulatory rules for artificial intelligence and slowing the expansion of the sector, which raised concerns among investors, according to Reuters.
In energy markets, oil prices are heading for a sharp decline during the week, with investors hoping that the escalation in the conflict with Iran will decline, following the major electoral losses suffered by the party of US President Donald Trump. However, continued supply concerns provided support for prices.
The ten-year German government bond yield, the benchmark index for the euro zone, fell by two basis points to 3.22 percent, its lowest level since August 26, on track to record a weekly decline of about 9.5 basis points.
European rate hike bets decline
Traders reduced their bets on the European Central Bank raising interest rates in the future. Euro short-term interest rate (ESTR) futures indicate expectations that the deposit rate will stabilize at 3.02 percent by late 2027, compared to 3.25 percent at the end of October.
Markets had roughly priced in an 80 percent chance of raising interest rates next month, from their current level of 2.50 percent.
In the European bond market, the spread between French government bond yields (OATs) and German government bonds (Bunds) remained approximately stable at 154.50 basis points, after recently recording 177.70 basis points, which is its highest level since November 2011.
Asian stocks fell sharply, Friday, in the wake of a broad wave of selling on Wall Street that affected shares of companies related to artificial intelligence.
The Japanese benchmark Nikkei 225 index fell by 6.1 percent to 57,332.92 points, falling below the level of 60,000 points for the first time in about six months. Shares of Japanese technology companies were among the most affected, led by SoftBank Group and Advantest.
In Australia, the Standard & Poor's ASX 200 index fell by 0.5 percent to 9,020.80 points, while the South Korean KOSPI index fell by 6.3 percent to 5,042.65 points, with a sharp decline in the shares of Samsung Electronics and SK Hynix.
The Hang Seng Index in Hong Kong also fell by 0.9 percent to 24,567.97 points, and the Shanghai Composite Index fell by 1.1 percent to 3,648.94 points.
Stock markets around the world are under pressure due to the continued decline in the shares of companies that have benefited from the artificial intelligence boom. These stocks have witnessed fluctuations for months, amid fears that the construction of artificial intelligence data centers will slow due to the significant rise in the cost of borrowing. Critics also believe that artificial intelligence stock valuations have risen to exaggerated levels, and that the market is witnessing a bubble.
Toyota Motor Company shares fell sharply, after the Japanese automaker announced profits below expectations the previous day.
Wall Street records its largest daily losses since April 2025
In Thursday's trading on Wall Street, the Standard & Poor's 500 index fell by 4.4 percent, recording its worst daily performance since the tariffs announced by US President Donald Trump in April 2025, under the name “Liberation Day,” caused turmoil in global markets.
The selling wave erased more than all of the gains achieved by the US stock market the previous day, when it recorded its best performance in three months.
The Dow Jones Industrial Average fell 1,833 points, or 3.4 percent, while the Nasdaq Composite Index fell by 5.5 percent. The index, which includes a large number of technology stocks and companies related to artificial intelligence, is 11.9 percent lower than the record high it recorded last month. Investors call a stock decline of more than 10 percent a “correction.”
The US midterm elections, which were held on Tuesday, increased the challenges facing the sector. Broad Democratic victories across the country have raised the possibility that governments might impose a temporary moratorium on building more data centers. Voters of all political affiliations are concerned about artificial intelligence and object to increases in electricity bills resulting from data centers.
Any slowdown in the construction of artificial intelligence data centers would lead to a decline in purchases of chips designated for these technologies, as well as a decline in demand for electricity and other products and services captured by the artificial intelligence boom, which has become a major driver of the growth of the American economy.
The stock of Nvidia, which quickly became the most prominent face of the artificial intelligence boom, fell by 9.3 percent, and had the largest negative impact by a wide margin on the Standard & Poor's 500 index. The stock is currently declining by 2.6 percent since the beginning of the year, after annual gains amounting to about 39 percent, 171 percent, and 239 percent during the past three years, respectively.
Advanced Micro Devices shares also fell by 17.3 percent, and Core Wave shares, which specializes in renting access to artificial intelligence chips to customers via cloud computing, fell by 9.8 percent. Shares of GE Vernova, which contributes to providing energy for data centers, fell by 7.5 percent.
The pressure on investors increased due to the large weight of shares of artificial intelligence chip companies on Wall Street, after they became among the largest companies listed on the market. For example, a 1 percent move in Nvidia's stock affects the Standard & Poor's 500 index to a greater extent than the impact of a move in the stock of almost any other American company at the same rate.
In the long term, stock prices tend to move in accordance with trends in corporate profits and interest rates, as the influence of these two factors goes beyond the influence of the identity of the party that controls the decision-making centers in Washington.
On Friday, the Japanese Nikkei stock index recorded its worst weekly performance in more than 6 years, affected by the losses incurred by technology stocks on Wall Street during the previous session, in light of growing investor fears that the recent political transformations in the United States will affect the path of development of the artificial intelligence sector.
The index suffered its largest daily loss since April 2025, with the widening wave of selling that affected the shares of electronic chip manufacturers and companies related to artificial intelligence. This wave began on Wednesday, as it became clear that the Democrats had won control of the US Congress.
Investors fear that Congress will seek to obstruct the expansion of artificial intelligence infrastructure, and impose additional restrictions and challenges on smaller companies, which are already facing difficulties in obtaining financing in light of rising interest rates and tightening financial conditions.
The Nikkei index, which is heavy on technology stocks, closed down 6 percent to 57,434.77 points. The wave of selling extended to the vast majority of the components of the index, as shares of 222 companies out of 225 declined, while only three shares rose.
On a weekly basis, the index’s losses amounted to 9.3 percent, recording its largest decline since March 2020, at the height of the “Covid-19” pandemic.
In the United States, the Standard & Poor's 500 and Nasdaq Composite indices recorded their largest daily decline since April 2025 on Thursday.
Maki Sawada, a strategist at Nomura Securities, said that the markets may remain vulnerable to waves of volatility, with renewed concerns from time to time regarding issues, including the delay in establishing artificial intelligence data centers and developing its technologies, as well as rising costs, which may raise questions about the profitability of companies operating in this sector.
She added that the markets may move from the broad rise that has included artificial intelligence stocks so far to a more selective approach, based on evaluating the performance of each company individually.
The broader Topix index fell by 5.9 percent, with all 33 of its industrial sector indices declining.
The Nikkei Volatility Index also jumped to its highest level since March 31, Friday, indicating escalating anxiety in the markets.
Shares of companies that were previously the most prominent beneficiaries of the artificial intelligence boom were the most exposed to selling pressure. The shares of SoftBank Group, which invests in emerging companies, fell by 10.8 percent, while the shares of Advantest, which specializes in electronic chip testing equipment, fell by 5 percent.
Bond yields fall to their lowest levels in months
On the other hand, Japanese government bond prices rose during Friday trading, with their yields falling to their lowest levels in several months, as investors turned to safe traditional assets in light of the worsening wave of selling led by technology company stocks.
Market turmoil also prompted investors to reassess the possibility of the Bank of Japan raising interest rates next month, which boosted demand for government bonds and put pressure on their yields.
Traders are currently 58 percent likely that the Bank of Japan will keep interest rates unchanged in December, compared to a 42 percent chance of raising them.
The yield on 10-year Japanese government bonds, the benchmark index, fell by 14.5 basis points to 2.61 percent, hitting its lowest level since June 26.
The two-year bond yield, which is most sensitive to monetary policy expectations, fell by 13.5 basis points to 1.72 percent, its lowest level since August 28. The five-year bond yield fell by 16.5 basis points to 2.025 percent, hitting its lowest level since August 6.
Yusuke Matsuo, chief market economist at Mizuho Securities, said that the continuation of turmoil in the financial markets for a period of time will make it difficult for the Bank of Japan to move forward with raising interest rates, which may increase the state of instability. He added, "The incentive for the Bank of Japan to adopt a wait-and-see approach will grow stronger."
In stock markets, the Japanese Topix index fell by about 6 percent, on Friday, while the Nikkei index, which is heavy on technology stocks, fell by 5.7 percent, amid fears that the widespread victory of the Democrats in the US midterm elections, earlier in the week, would lead to tightening regulatory oversight and slowing down investments related to artificial intelligence.
On the other hand, ultra-long-term Japanese bond yields recorded a less severe decline compared to their short- and medium-term counterparts, after the recovery in Brent crude prices overnight revived fears of long-term inflationary pressures. The 20-year Japanese government bond yield fell by 8.5 basis points to 3.51 percent, while the 30-year bond yield fell by 4 basis points to 3.805 percent.
