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Global markets remain in shock: Nikkei, Dow Jones, Kospi at lows

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Japan’s Nikkei 225 stock index started the week down 12.4%, continuing the sell-off that has rocked global markets as investors fretted over the state of the US economy.

The Nikkei closed down 4,451.28 points at 31,458.42. The broader TOPIX index fell 12.8% as selling intensified in the afternoon.

Earlier on Monday, the S&P 500 Index fell 2.4% and the Dow Jones Industrial Average fell 2.6%, turning the trading outlook on Wall Street negative.

The report, which showed that hiring by US employers slowed much more than expected last month, according to AP, shook financial markets and destroyed the euphoria that had lifted the Nikkei to an all-time high above 42,000 in recent weeks.

The Nikkei 225 fell 5.8 per cent on Friday, its worst two-day drop ever. Its worst one-day drop was on 20 October 1987, the so-called “Black Monday”, when it fell 3,836 points, or 14.9%. That Monday was grim enough, with the benchmark falling as much as 13.4% at one point.

Tokyo stocks have been falling since the Bank of Japan (BoJ) raised its key interest rate on Wednesday. The Nikkei is currently down 3.8% year-on-year.

One of the factors that prompted the BoJ to raise rates was the ongoing weakness of the Japanese yen, which has pushed inflation above the central bank’s 2% target. Early on Monday, the dollar fell to 142.59 yen from 146.45 at the end of Friday, well below levels of over 160 yen a few weeks ago. The euro also fell from $1.0923 to $1.0914.

Stocks hit highs earlier this year on the back of developments in artificial intelligence.

The recent sell-off has also hit markets dominated by computer chip makers such as Samsung Electronics and other technology stocks: South Korea’s Kospi fell more than 9 per cent on Monday as Samsung’s shares fell 11.6 per cent. The Kospi closed down 8.8 per cent at 2,441.55.Taiwan’s Taiex also lost 8.4 per cent as the world’s biggest chipmaker Taiwan Semiconductor Manufacturing Co. fell 9.8 per cent.

Hong Kong’s Hang Seng index lost 2.2% to 16,579.97 and Australia’s S&P/ASX 200 index fell 3.7% to 7,649.60.

Double whammy on Borsa Istanbul

The Shanghai Composite Index, which has been somewhat isolated from other world markets by capital controls, initially rose but then fell 1.5 per cent to 2,862.56.

The S&P 500’s 1.8 per cent drop on Friday was the first consecutive loss of at least 1 per cent since April. The Dow Jones Industrial Average fell 1.5 per cent and the Nasdaq Composite Index fell 2.4 per cent, 10 per cent below the record it set last month. Investors call a decline at these levels a “correction”.

On the Borsa Istanbul, the circuit breaker system connected to the index was activated at 09:55:22 following a 6.72 per cent drop in the morning. Then, as the decline in the index deepened, the circuit breaker was activated for the second time. The BIST 100 index fell below the critical 10,000 points.

Stocks fell sharply on Friday after weaker-than-expected US payrolls data fueled fears that high interest rates to curb inflation could drag the US economy into recession.

The VIX, an index that measures how worried investors are about an impending drop in the S&P 500, jumped nearly 26% early on Monday. Eventually, the VIX rose to 34. The VIX, which is considered Wall Street’s “fear indicator”, last reached this level in June 2020. Bitcoin, which recently soared to nearly $70,000, fell 14 per cent to $54,155.

Oil prices also fell, with US benchmark crude down 74 cents to $72.78 a barrel. Brent crude, the international standard, lost 67 cents to $76.14 a barrel.

Artificial intelligence stocks plunge

Artificial intelligence stocks fell as much as 9.6%, with Apple down 6.1%. Microsoft, Meta and Tesla also lost more than 5%.

While the largest US companies fell on Tradegate in Germany, Nvidia led the “Magnificent Seven” group in the decline of US stock index futures.

Nvidia fell as much as 17% on Tradegate, while Apple fell 10%, Microsoft 9%, Alphabet 9.6%, Amazon 9.3%, Meta 10% and Tesla 10%.

According to Bloomberg, these moves are a sign that “the air is coming out of the equity markets, driven by big gains in a small number of stocks”.

It notes that if confidence in the AI trade continues to fall on weak earnings and the US economy really takes a hit, there could be more losses to come.

However, it points out that a “window of opportunity” could open for investors, especially if central banks take action to cut interest rates, which could support sectors that benefit from low borrowing costs.

Goldman Sachs: A healthy correction

In a report, IG’s Yeap Jun Rong said investors will be watching data on the US services sector from the Institute for Supply Management on Monday, which could help determine whether the global sell-off was an overreaction.

The global rout began just days after US stock indexes had their best day in months after Federal Reserve Chairman Jerome Powell gave the clearest sign yet that inflation is slowing enough to start cutting interest rates in September.

Now there are growing concerns that the Fed may have increased the risk of recession in the world’s largest economy by keeping its key interest rate at a two-decade high for too long.

On the other hand, Christian Mueller-Glissmann of Goldman Sachs told Bloomberg that the market situation shows a “somewhat healthy correction”. He also argued that while the weakness in US data was a surprise, Goldman Sachs economists were “not that worried”.

Bets on an immediate rate cut: Will the Fed cut in a week?

The market turmoil is fuelling bets on an immediate policy response from the Fed.

Investors are currently pricing in a 60% chance of a 25bp cut within a week.

Given that the central bank announced its last decision just a few days ago, this is seen as a real sign of concern.

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US wealthy demolish multimillion-dollar mansions for land

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Wealthy buyers in the US are tearing down multimillion-dollar homes shortly after purchasing them for hundreds of millions of dollars.

According to a report by The Wall Street Journal, the trend is driven by a shortage of land in prestigious locations, particularly along coastlines.

For ultra-wealthy buyers, the prime factor has become the land’s location rather than the structure standing on it. After the acquired properties are flattened, newer, more modern homes are built on the cleared lots.

Drawing attention to the shift in the luxury real estate market, the report noted:

“The home itself, formerly the primary driver of an expensive real estate purchase, is now almost beside the point. Buyers are competing first and foremost for well-located land, situated on the ocean or a mountaintop.”

The newspaper cited moves by US billionaire William Lauder as an example. Lauder purchased the oceanfront estate of radio host Rush Limbaugh, who died in March 2023, for $155 million and had it completely demolished in July.

Lauder had previously torn down two homes situated on roughly 1.2 hectares of land along the Palm Beach coast. Having initially planned to construct his own residence on the parcel, Lauder subsequently sold the cleared plot for approximately $200 million.

Jonathan Miller, a real estate appraiser, stated that such transactions are becoming increasingly common as land prices rise.

Amid this momentum, estate agents have also begun marketing luxury homes directly as teardown lots.

Listings use artificial intelligence-generated imagery to showcase how the land would look without the structures on it.

Marketers avoid using the word “demolition” directly, resorting instead to terms such as “adaptive reuse”.

Teardown listings rise across luxury housing market

The trend is not confined to the coast and is spreading to other regions across the US.

Data from property brokerage Redfin reveals that references to demolishing buildings are becoming more frequent in sales listings.

The share of such listings exceeds 15% in the Bunker Hill Village area of Houston, while standing at 6.67% in Pimmit Hills, Virginia.

Dina Goldenteyer, a real estate agent working in Miami, remarked that serial demolitions have become more frequent because buyers no longer appreciate homes older than a decade.

Former retail executives Jamie Dooley and Christine Scott spent $3.7 million in 2020 to demolish a seaside home near Destin, Florida.

Although the couple spent five years building a modern home on the cleared site, they listed the resulting new structure with a demolition condition, citing the fact that no one wanted to buy the property as it stood.

William Paddock, an employee at the environmental consultancy WAP Sustainability, pointed to the environmental damage caused by this construction cycle.

Paddock emphasized that tearing down a home of roughly 1,000 square metres and replacing it with a new building of approximately 2,700 square metres generates a carbon footprint equivalent to the annual emissions of an average 250 American households.

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US inflation reaches 3.7% as midterm election campaign intensifies

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An uptick in September inflation as the US midterm elections approach has pushed the cost-of-living debate back to the centre of the agenda for Democrats seeking to regain control of Congress from Republicans.

Annual inflation stood at 3.7% in September, according to the Consumer Price Index published by the Bureau of Labour Statistics, with energy, petrol, and electricity costs rising on a monthly basis.

Food prices remained flat from August to September, recording a 2.5% increase compared with the same period last year.

Democrats are anchoring their election campaigns to pledges of easing the cost of living, blaming the price increases on President Donald Trump’s tariffs and the war with Iran.

Trump and Republicans, pointing to the numerous left-wing candidates who won primary elections this year, contend that the opposition has become captive to “communists” within the party.

When annual inflation stood at 2.4% in February, the US and Israel launched the Iran war on the final day of that month, and prices continued to climb throughout the conflict.

The recent acceleration has not entirely reversed the retreat from the 40-year peak of 9.1% recorded in June 2022; however, the rate has remained above the Federal Reserve’s 2% target for over five years.

Fed policymakers raised the benchmark interest rate by a quarter of a percentage point last month, citing the battle against stubborn inflation. Officials will convene again next week to consider whether to raise rates or hold them within the 3.75% to 4% target range.

Energy and fuel record sharpest increase since first month of war

In September, energy prices posted their largest monthly jump since March, the first full month of the war with Iran, climbing 20.4% year-on-year. Energy costs had risen 2.1% from July to August, after falling 1.5% from June to July and 5.7% from May to June.

Recent escalations in Iranian attacks on oil tankers in the Strait of Hormuz, alongside more frequent strikes by Ukrainian forces against Russian refineries, have strained global crude oil and refined product markets, driving up US petrol and diesel prices.

Petrol prices also recorded their sharpest monthly increase since the first month of the war, climbing 9.1% from August to September, bringing the annual increase to 35.3%.

American Automobile Association (AAA) data shows the average price of regular petrol across the US stands at $4.26 per gallon; while below the level of roughly $4.48 recorded a month ago, it remains more than $1.20 higher than a year earlier. Average gallon prices exceed $6 in California and $5 in both Washington state and Nevada.

Electricity prices rose 0.2% from August to September, offsetting the 0.2% decline between July and August, and were up 4.4% year-on-year.

Heavy power demand from new data centres is feeding through into local household electricity bills. Trump argued that companies must cover the cost of the electricity required by their data centres themselves.

In a post on Truth Social, Trump claimed that he was requiring large data centres to generate their own power and feed the surplus back into the local grid, suggesting this could bring about “a major drop” in electricity prices.

Used vehicle market posts monthly rise as food costs stabilise

The cost of food at home fell 0.1% month-on-month in September, while dining out increased 0.2%.

Egg prices dropped to $2.27 a dozen, falling roughly 35% compared with September 2025 and remaining well below the 20-year peak of $6.23 recorded in March 2025.

Ground beef prices rose roughly 2.4% compared with September 2025, but at $6.48 a pound, they remained below the 20-year high of $6.98 reached in June.

Chicken held steady at its year-earlier level of $2.06 per pound last month, having fluctuated between $2.01 and $2.09 since November 2024.

Used car and truck prices fell 1.5% compared with September 2025, but rose 0.7% month-on-month in September following 0.4% increases in both July and August.

Heather Long, chief economist at Navy Federal Credit Union, noted that the sector faces severe pressure stemming from a combination of expensive replacement parts and a shortage of skilled labour.

Speaking to The Hill, Long emphasised that every cost pressure across the market is being felt directly at local auto repair shops.

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Anthropic posts $80.7bn loss ahead of IPO as computing costs soar

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Anthropic, developer of the artificial intelligence model Claude, reported a net loss of $80.7 billion for the first six months of 2026 ending 30 June.

According to a report by The Wall Street Journal citing the company’s draft initial public offering prospectus, this recorded loss nearly doubled the $42 billion loss incurred across the entirety of 2025.

The vast majority of that enormous figure, accounting for $72 billion, stemmed from accounting-driven book-value write-downs.

In contrast, the company saw a sharp surge in revenue, with turnover in the first half of the year climbing to $16.3 billion from $1.1 billion in the same period of the prior year.

During this period, Anthropic spent approximately $9 billion on computing power and infrastructure needs, surpassing in just six months the $7.3 billion spent across the whole of 2025.

The company has commitments to pay roughly $450 billion over the next seven to 10 years under cloud service contracts.

Under these obligations, contracts are planned for $111 billion with Google Cloud, $110 billion with Amazon Web Services, and $31 billion with Microsoft.

Anthropic will also spend up to $86 billion by 2033 and 2034, respectively, to lease Nvidia chips through smaller AI-focused cloud providers Nscale and Lambda.

The company could spend an additional $750 billion in the coming years to expand its computing capacity.

Roughly a third of the draft IPO prospectus was dedicated directly to risk factors.

The document highlighted the possibility that models could cause tangible real-world harm, noting that artificial intelligence could exhibit a “self-preservation” tendency and produce responses resembling “blackmail”.

Anthropic warned that the scale of damage caused by an AI-driven “catastrophic event” could render insuring against such risks impossible.

According to market expectations, Anthropic’s IPO could rank among the largest transactions in history, potentially surpassing SpaceX’s record.

Following the market debut, the company’s market valuation is projected to reach up to $2 trillion.

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