AI rally fears and China trade woes chill stocks

By Lawrence White LONDON (Reuters) -Tech-heavy stock markets were heading for their biggest weekly fall in seven months on Friday, as investors fretted over the sustainability of a rally in artificial intelligence stocks. Weaker-than-expected China trade data also showed how hard U.S. President Donald Trump's tariffs have hit. The STOXX benchmark of 600 big European companies edged down 0.17% in early trading Friday morning, even as U.S. markets looked set for a brighter open with S&P 500 futures and Nasdaq 100 futures up 0.3% following a 1.9% drop for the Nasdaq on Thursday.[.N] For the week so far, the world's biggest tech index is down 2.8%, which if sustained would mark its largest one-week drop since April, when tariffs were announced. The Nasdaq has gained more than 50% since then. China's exports shrank 1.1% in October, the worst performance since February, chilling Asian markets with a stark reminder of the manufacturing juggernaut's reliance on American consumers. China's blue-chip CSI300 Index and the Shanghai Composite Index both finished 0.3% lower on Friday. Japan's Nikkei fell 1.2% to head for a weekly loss of 4.1%, the largest since April, while in Seoul the KOSPI fell 1.8% for a 3.7% weekly fall, the largest since February. [.T][.KS] Chip and cable makers were among the biggest losers, with tech investor Softbank Group Corp down nearly 20% this week. Bitcoin, sometimes a bellwether for tech sentiment, is down 8% on the week to $101,525. FEARS OVER BUBBLE IN AI STOCKS There has been no obvious trigger for the pullback in AI-related share prices but the market reaction to recent results shows how some of the fears about a bubble in the sector and questions about profitability are starting to surface. Late last month, Meta stock dived after the company outlined big capital expenses as it builds data centres in an AI push. Shares in data and AI firm Palantir Technologies have also tumbled despite beating earnings forecasts. "Sometimes it's a gradual shift in markets whereby an increasing number of people say: 'Well, I'm well positioned … maybe I'll take some money off the table,'" said Herald van der Linde, head of equity strategy for Asia Pacific at HSBC. "And a second one says so. And a third one. And a fourth one says, hey, these three are selling. I might maybe be selling as well, right? So it's a shift in the market sentiment that has its own sort of dynamic. That might well be unfolding a little bit now." BONDS, GOLD SHINE AS SAFETY SOUGHT Bond markets rallied on a clamour for safety and also as some second-tier U.S. employment data pointed to a wave of layoffs that could support further U.S. rate cuts. [US/] Benchmark 10-year U.S. Treasury yields fell 6.4 basis points to 4.09% on Thursday after outplacement firm Challenger, Gray & Christmas said there had been a surge in announced job cuts in October. The yields were steady on Friday. Such private surveys have gained attention in the market during a prolonged U.S. government shutdown that has halted official U.S. data publication. The dollar index, which measures the currency's strength against a basket of six peers, edged up 0.2% to 99.845, while the euro was mostly steady at $1.1535. The safe-haven yen was set for a modest weekly rise of about 0.3%, and was last at 153.46 per dollar. [FRX/] Gold traded above $4,000 an ounce as the government shutdown further boosted safe-haven demand, although the precious metal was still some way short of a record high of $4,381.21 on October 20. Oil prices rose slightly following three days of declines on worries about excess supply and slowing demand in the U.S., with Brent crude futures up 69 cents, or 1.09%, to $64.05 a barrel. Soybean prices headed for a weekly drop with no sign yet of big Chinese orders, after the White House said Beijing had pledged to buy 12 million tons by year end. [GRA/] (Editing by Lincoln Feast, Jacqueline Wong and Sharon Singleton)

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