Global markets rebound as bargain hunters return to technology shares

Global stock markets rallied as investors returned to beaten-down technology shares, with the FTSE 100 edging closer to record territory after a strong advance on Wall Street.

The S&P 500 surged, while Japan’s Nikkei and South Korea’s Kospi also jumped as bargain hunters took advantage of recent weakness in technology stocks.

Falling energy prices have helped ease inflationary pressures, providing further support for equities. London’s blue-chip index has also benefited from its more defensive composition, helping it recover ground despite continuing uncertainty across global markets.

However, political risks remain. Democrats made gains across Congress and state offices, potentially strengthening their ability to challenge the expansion of energy-intensive data centres and constrain the infrastructure underpinning the artificial intelligence boom.

Meanwhile, Anthropic is preparing for a potential stock market flotation in a more sceptical investment climate. The AI company has reportedly tempered its valuation ambitions as investors increasingly demand evidence of sustainable commercial returns rather than promises built on the sector’s extraordinary growth.

Elsewhere, Britain’s grocery market has recorded increased sales following the Government’s Be Ready campaign, which encouraged households to prepare for possible disruption to essential services.

Princes Group, the food manufacturer known for its tinned tuna, has also reported a surge in revenue, highlighting continued demand across the grocery sector.

Susannah Streeter Chief Investment Strategist, Wealth Club said: “Nvidia might have been pushed out in the cold, but sentiment is starting to thaw as a broad tech rally takes hold. The chipmaker looks set to claw back a little more ground as investors lick their wounds following the Chinese spy scandal, while others buy back in amid the market rebound.

As bargain hunters went shopping for stocks, the S&P 500 surged, Japan’s Nikkei gained 2.7% and South Korea’s Kospi also jumped higher, as investors piled back into semiconductor names that had experienced the worst of the sell-off.

With no further indication of how far Democrats in Congress will go in trying to slow the AI juggernaut, a little more risk appetite has returned. But plenty of volatility is set to remain. The blue wave has also propelled politicians into office across multiple states, giving them the power to curb data centre development.

Energy prices continue to fall sharply, easing inflationary pressures and giving the tech sector an extra lift. A less severe interest rate environment also supports the value of future earnings.

London’s Footsie is on the front foot again in early trade. While it does not have quite the same spring in its step as other indices, it has been more immune to the tech sell-off. Like a tortoise, its progress has been slow but steady this year, without the drama of its hare-like peers. It looks set to head back towards record levels, helped by the more defensive nature of its constituents amid the tumultuous tech climate.

Anthropic is spying an opportunity to get its IPO over the line. However, the tech rout has come at a big cost for the company. Gone are the lofty ambitions of trying to float at a $2 trillion valuation. Anthropic is having to deal with the stark reality of a much more sceptical investor base.

The latest reports suggest some prospective investors are now discussing a valuation of around $1.1 trillion to $1.4 trillion, a substantial step down from the ambitions being talked about earlier in October. Despite the current rebound, it’s a febrile environment. The FOMO wave has been replaced by a rip current of uncertainty, with investors less fearful of missing out than of being caught out if another brutal market sell-off returns.

There will still be appetite for the IPO, which could be the biggest since the SpaceX flotation, but Anthropic will not want it to be a flop. It will need to show investors on the roadshows this week that there is real value behind the hype, rather than expecting them to swallow another eye-watering AI valuation.

There are plenty of risks ahead, especially given the firm’s stark warnings that AI could pose an existential threat to humanity. It is a much harder sell when an anti-AI mood is swirling and Democratic leaders are turning increasingly wary, showing determination to tighten regulation and limit the harmful impact of the technology.