ASML Weak Outlook Drags Global Chip Stocks Lower

ASML's forecast of weak 2025 sales, despite booming AI chip demand, triggered a sell-off in chip stocks globally, with the European tech index dropping 6.5%. Luxury stocks also fell as LVMH reported a decline in quarterly sales due to weakening consumer demand in China, heightening concerns about the luxury sector's reliance on Chinese markets. Investors are now looking to UK inflation data and a Beijing press conference for further economic indicators.

Equities

The FTSE 100 closed down 0.5% on Tuesday, weighed down by falling oil and mining stocks as commodity prices tumbled. The FTSE 350 energy index slid 3.5%, driven by nearly 5% declines in crude oil prices, following reports that Israel would avoid striking Iranian oil targets.

BP and Shell saw their shares drop by 3% and 3.2%, respectively, as demand concerns and easing supply pressures hit the energy sector. Additionally, copper prices reached a three-week low, pulling mining stocks lower, with Glencore down 3.4% and Anglo American losing 3.1%.

In contrast, British homebuilder Bellway jumped 8.3% after projecting higher home completions in 2025, buoyed by the potential for further interest rate cuts. The FTSE 30 homebuilders index rose 3.1%, with Bellway leading the gains. Airlines also saw a lift, as falling oil prices eased fuel cost concerns, with British Airways-owner IAG rising 4.1% and EasyJet up 3.1%.

Across the Atlantic, Wall Street’s major indices closed lower, led by a 1% drop in the Nasdaq. Chip stocks tumbled, with Nvidia falling 4.7% from its record high amid reports that the Biden administration may cap AI chip exports.

The broader US semiconductor index dropped 5.3%, marking its worst day in over a month. ASML's weak sales forecast further pressured the sector, with its US-listed shares falling 16%.

Energy stocks in the US followed a similar trend to the UK, with the energy sector falling 3% as crude prices continued to slide. ExxonMobil and Chevron both declined around 2.9% amid concerns over global oil demand.

On the upside, Walgreens Boots Alliance surged 15.8% after reporting a slight earnings beat and announcing plans to close 1,200 stores in a cost-cutting effort.

In the financial sector, Bank of America rose 0.5% after strong third-quarter results, while Charles Schwab saw a 6% rise after also beating profit estimates. However, Citigroup dropped 5% due to weaker-than-expected net interest income.

Forex & Commodities

The US dollar hovered near a two-month high, supported by expectations of modest interest rate cuts from the Federal Reserve and increasing odds of a potential Donald Trump presidency. The dollar index remained steady at 103.24. Meanwhile, the euro slipped 0.05% to $1.0887, as investors anticipated an interest rate cut by the European Central Bank later this week.

In commodities, gold traded in a narrow range, edging up 0.2% to $2,667.01 per ounce, nearing its recent record high. The precious metal remains attractive amid speculation that the Fed will continue cutting rates, with a 97% chance of a 25-basis-point reduction expected in November. Silver also rose 0.5% to $31.63, while platinum gained 1.2% to $996.20.

Oil prices dropped sharply, with Brent crude falling 4.14% to $74.25 per barrel, and West Texas Intermediate down 4.4% to $70.58. The decline followed reports that Israel would avoid targeting Iranian oil facilities, easing concerns over supply disruptions. Additionally, weaker demand forecasts from both OPEC and the International Energy Agency weighed further on crude prices.