Trader angst pivots from inflation to growth as tech rout deepens
QQQ•A deepening tech selloff clouded the global growth outlook and weakened bets on December rate hikes by the Federal Reserve and European Central Bank. Traders priced a roughly 70% chance of a Fed hike, down from over 80% last week, and a 60% chance of an ECB hike, down from 75%.
1. Tech rout clouds outlook
The tech selloff further clouded the outlook for a global economy bolstered by the AI boom, as traders questioned whether central banks would have scope to raise rates in response to an Iran war-induced energy price surge. The Nasdaq had its deepest one-day drop since April 2025, and the selloff wiped out trillions of dollars in market value. Taiwan shares posted their worst week since 2001.
2. Rate-hike bets retreat
Markets priced a roughly 70% chance of a December Federal Reserve rate hike, down from over 80% last week, and a roughly 60% chance of an ECB hike, down from 75%. US two-year yields were on track to fall 10 basis points for a second straight week. Analysts said tighter financial conditions and weaker consumer spending could weigh on growth, while higher energy prices continued to pose inflation risks. The IMF forecasts global growth of 3.1% this year and says a steep drop in AI investment could reduce global GDP by 1.1% by 2028 in one downside scenario.
