LONDON: Global stocks declined ⁠on Monday as fresh hostilities in the Middle East pushed up oil prices and as investors rushed out of the hottest AI-linked shares on ‌fears that the bull run has gone too far, too fast. The twin triggers for the tech rout were last week's disappointing outlook at chipmaker Broadcom and a surprisingly strong U.S. jobs ​report on Friday that has traders pricing in a rate hike from the Federal Reserve this year. Escalating conflict in the Middle East is also hurting sentiment after Israel said it struck ​military ​targets in western and central Iran, pushing Brent crude futures 5% higher.

"The market has gone a long way without a correction," said Lars Skovgaard, senior investment strategist at Danske Bank.

"The big surprise is not that we had a selloff, but that we didn't have it before."

Europe's STOXX ⁠600 was down 0.8% on Monday. Major bourses in Frankfurt, Paris and London were down between 0.4% and 1%.

Europe's relative lack of a technology hardware sector and greater exposure to energy prices have meant its major markets have largely taken a back seat in the rally that has gripped Wall Street, Tokyo and Seoul, but it also makes the region more insulated than other markets to a sharp selloff in the tech space.

In Asia, the decline in equity markets was starker. South Korea's chip-heavy ​KOSPI, the world's best-performing market this ‌year, led losses ⁠with an 8.3% slide that ⁠has the benchmark down over 16% from last week's record high.

Japan's Nikkei fell almost 4% with market darlings across the computer-chip production supply chain falling furthest, while Taiwan's benchmark sank ​3.5%. Nasdaq futures were attempting a recovery following a sharp selloff on Friday when the index dropped 4.2%.

"The move looks ‌more like a positioning and momentum unwind than a reassessment of the long-term AI story," said ⁠Marc Velan, head of investments at Lucerne Asset Management in Singapore.

"(South) Korean technology names have been among the strongest performers globally and were heavily owned, so when rate expectations shifted after the jobs report, they became a natural source of liquidity."

In bonds, the 2-year Treasury yield rose more than 11 basis points on Friday after the robust jobs report. It was up 1.5 bps on Monday to 4.1784% as markets bet that the Fed will hike rates this year. The benchmark 10-year yield rose 3.5 bps on Monday to 4.57%.

"The yield rise was the one that cooked the market. That was the last straw," Danske Bank's Skovgaard said.

"With volatility rising you've had some forced selling of investors having to lower their exposure to equities."

 

INFLATION AND ECB AHEAD

The week ahead is headlined by the giant SpaceX listing, expected to price on Thursday and trade on Friday, but inflation will also be in focus with U.S. consumer price data ‌due on Wednesday and central bank meetings in Canada and Europe. Last week, bitcoin notched its heaviest ⁠weekly drop since the collapse of crypto exchange FTX in late 2022, falling about 16%. It was up slightly ​on Monday, hovering just above $63,000.

SpaceX's debut is expected to be followed by other major IPOs in the coming months from Anthropic and OpenAI, raising so much money that brokers are nervous it could draw down other assets.

"The market regime has potentially shifted from moderate inflation and rate cuts to potential 'overheating' contributing to higher Treasury yields, a higher path of ​short-term interest rates and ‌tighter liquidity," said Nick Ferres, CIO of Vantage Point Asset Management in Singapore.

In currency trading, the dollar was firm and ⁠holding above 160 yen, keeping investors on watch for intervention ​from Japanese authorities. The euro hovered at $1.1518. (Reporting by Samuel Indyk and Tom Westbrook; Editing by Shri Navaratnam, Thomas Derpinghaus and Ros Russell)