World share markets slipped again on Tuesday as voting began in the United States midterm elections, with investors still worried about the huge sums technology companies are spending on artificial intelligence. It was the third straight session of falls for American shares, and Asian markets led the decline overnight.
The elections will decide which party controls Congress, America’s parliament. That matters for markets because Congress shapes taxes, spending and rules for big companies, including technology firms. Prediction markets — websites where people bet on outcomes — put the chance of Democrats winning both chambers at about 77 percent, according to Reuters. Such an outcome could mean tougher oversight of artificial intelligence and more regulation of large companies.
What is the AI worry?
Artificial intelligence, or AI, means computer systems that can learn from data and carry out tasks such as writing, coding and answering questions. The world’s largest technology companies have spent enormous amounts building the data centres and chips needed for AI, and investors now want proof that this spending will turn into profit.
That proof has been slow to arrive. Apple, the world’s most valuable company, forecast lower profit margins for the crucial holiday quarter on Monday, blaming rising memory-chip costs, and its forecast for services revenue fell well short of what Wall Street expected. Apple shares fell 2.8 percent in after-hours trading.
A weak day across Asia and Europe
Asian markets fell sharply on Tuesday. South Korea’s Kospi index dropped 3.6 percent and Taiwan’s index fell 3.6 percent, its steepest one-day decline since late July. A broad index of Asia-Pacific shares outside Japan fell 1.2 percent, according to Bloomberg.
In Europe, the pan-European STOXX 600 index fell 0.6 percent to 645.36 points. American futures — contracts that point to where markets may open — were mixed: Nasdaq 100 futures, which track large technology companies, were broadly flat, while S&P 500 futures slipped 0.14 percent. The Nasdaq has now entered what traders call a technical correction, meaning it has fallen 10 percent or more from a recent peak.
What it means for Pakistan
Pakistan’s own market does not move in lockstep with Wall Street, but global mood still matters. When American technology shares fall sharply, investors often become more cautious, and money can flow out of riskier markets, including emerging markets such as Pakistan. That can put pressure on the rupee and on foreign investment.
There is also a link through interest rates. Traders now see about a 76 percent chance that the US Federal Reserve, America’s central bank, will raise interest rates in December. Higher American rates tend to strengthen the dollar and make borrowing costlier worldwide. For Pakistani readers, the practical point is simple: until the election result is clear and technology companies show their spending is paying off, markets are likely to stay nervous.
Sources: Reuters, Bloomberg. Written in our own words for information only — not investment advice.