Get Free Updates on Global Markets

Subscribe to receive our myFT Daily Digest e-mail, which compiles the latest market insights every morning, keeping you informed about significant trends and developments.

On Monday, European and Asian stock markets experienced a downturn as investors expressed concerns that declining global demand could negatively impact the semiconductor industry. The pervasive uncertainty surrounding economic conditions prompted a cautious approach among market participants, contributing to the overall decline.

The Stoxx Europe 600, an index that tracks a broad range of European stocks, fell by 0.5 percent, primarily influenced by weak performances in the healthcare and energy sectors. The French Cac 40 index dropped 0.6 percent, while Germany’s Dax index decreased by 0.3 percent at the start of trading, highlighting a widespread reluctance among investors.

In Asia, the situation was similarly bleak, with Hong Kong’s Hang Seng index and South Korea’s Kospi both declining by 1 percent. Meanwhile, Japanese markets were closed for a national holiday. Notably, China’s CSI 300 index was the only index to register gains in the region, climbing 0.5 percent, which may signal a divergence in regional market performance.

This market movement mirrored a recent tech-driven sell-off on Wall Street, spurred by reports indicating that Taiwan Semiconductor Manufacturing Company (TSMC)—the world’s leading contract chipmaker—had instructed major suppliers to delay shipments of advanced chip manufacturing equipment. This news contributed to investor anxiety regarding the sustainability of the technology sector.

TSMC’s shares fell by 3.2 percent on Monday as the company warned of a deepening downturn within the chipmaking sector. Despite the recent surge in artificial intelligence technology, TSMC’s outlook suggests that this growth has not sufficiently offset broader economic challenges and China’s sluggish recovery.

Nordic Semiconductor, listed in Oslo, saw a dramatic drop of 14.6 percent after revising its revenue forecast downwards for the third quarter, raising alarms about the stability of the semiconductor market. Similarly, Dutch chipmaker ASML’s shares decreased by 0.9 percent, while STMicroelectronics and BE Semiconductor saw declines of 1.2 percent and 2 percent, respectively. South Korea’s SK Hynix also faced a decline of 2.8 percent, reflecting widespread weakness in the sector.

As these developments unfolded, investors braced for interest rate decisions from three of the world’s major central banks this week. In the United States, the Federal Reserve is widely expected to maintain its target interest rate range between 5.25 percent and 5.5 percent, which indicates a cautious approach to monetary policy amid ongoing economic challenges.

Futures contracts tracking Wall Street’s S&P 500 index rose by 0.1 percent, while those linked to the tech-heavy Nasdaq 100 remained flat ahead of the New York market opening. This mixed performance suggests uncertainty as traders await further economic indicators.

Meanwhile, the Bank of England is anticipated to raise its benchmark interest rate by a quarter of a percent, bringing it to 5.5 percent, while the Bank of Japan is expected to keep its rates unchanged at minus 0.1 percent. These decisions will be critical in shaping economic expectations in their respective regions.

Adding to the pressure on central banks, inflation rates have recently ticked up in the United States and Europe. Rising oil prices, which have reached their highest levels this year following supply cuts from major producers, are likely to exacerbate inflationary pressures. Brent crude oil prices increased by 0.7 percent to $94.57 per barrel on Monday, remaining close to their highest point since November 2022, while the U.S. equivalent, West Texas Intermediate, rose by 0.9 percent to $91.55 per barrel.