Global Markets Retreat as Investors Await Nvidia Earnings and Weigh Federal Reserve Policy

Global financial markets experienced notable declines on Tuesday as investors grew cautious ahead of major corporate earnings and the upcoming US economic data release. Bitcoin briefly dropped below the $90,000 benchmark for the first time in seven months, reflecting anxieties about lofty technology stock valuations and diminishing expectations of a Federal Reserve interest rate cut in December.

European exchanges—London, Paris, and Frankfurt—all fell by over one percent following sharp losses across Asian markets. Joshua Mahony, chief market analyst at Scope Markets, remarked, "The tech-focused selloff seen in the US has evidently resulted in global contagion."

After a turbulent start to the year, bitcoin surged to an all-time high exceeding $126,000 last month, but the recent pullback underscores investor apprehension about the sustainability of tech sector gains amid questions over returns from artificial intelligence investments.

Market participants are eagerly awaiting Nvidia's quarterly earnings announcement scheduled for Wednesday, which is expected to provide crucial insights into the AI industry’s performance and future outlook. Additionally, earnings reports from major US retailers such as Home Depot, Target, and Walmart are anticipated to shed light on consumer spending trends.

Deutsche Bank's managing director Jim Reid noted, "The risk-off tone was reinforced by the latest signals from the Fed, as investors continued to price out the likelihood of a December rate cut." The focus will soon shift to the US September jobs report, postponed due to the recent government shutdown, which could offer further clarity on the Federal Reserve’s policy trajectory and the broader economic health.

In Asia, Tokyo’s market tumbled more than three percent amid investor concerns over Japanese bond yields, which reached their highest level since 1999, ahead of a planned economic stimulus announcement by Prime Minister Sanae Takaichi. The stimulus is expected to increase government borrowing, while Takaichi's upcoming meeting with Bank of Japan Governor Kazuo Ueda is expected to address potential interest rate adjustments.

The Japanese yen weakened to about 155.38 per dollar, its lowest level since January, reflecting diminished expectations for additional rate hikes. Contributing to the market nervousness were heightened tensions between Japan and China related to Taiwan, prompting both nations to issue travel advisories.

South Korea’s stock market fell over three percent, reversing some of the year-to-date gains driven by chipmakers Samsung and SK hynix, which faced significant selling pressure alongside Taiwan's TSMC, leading Taipei’s market to decline by over two percent. Hong Kong and Shanghai markets also closed lower, dropping nearly two percent and seeing modest losses respectively.