London, 20 October 2026 — EBM Newsdesk Analysis — By Katie Winearls
South Korea’s Kospi fell 3.7% on Tuesday as the sell-off in memory chip stocks returned. SK Hynix lost 4.2% and Samsung Electronics 3.0%, while America’s Micron Technology was down close to 3% in early trade. The detail that rattled investors most was a stock market debut. South Korean AI services firm Elice Group fell 32% on its first day of trading, weeks after Australia’s Nvidia-backed data centre group Firmus pulled its own flotation, citing poor market conditions.
For European investors, the message is that the AI trade has not found its floor. Last week’s dip-buying has faded, and markets are waiting for proof that the huge sums spent on AI will pay off. That proof may arrive this week, with SpaceX reporting tonight and Meta and Tesla tomorrow.
Asia Takes the Hit Again
Japan’s Nikkei fell 1.3%. SoftBank, Masayoshi Son’s giant AI bet, dropped 6%, and memory chipmaker Kioxia lost 3.4%. Hong Kong’s Hang Seng fell 1.2% and Australia’s ASX 200 slipped 0.3%. China’s Shanghai Composite edged up 0.1%, and India’s Nifty 50 rose 0.7%.
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SubscribeThe pattern is the same as last week. Markets most exposed to chips and AI are falling hardest, while those with less exposure are holding up.
Wall Street’s Rebound Fades
US stocks rose on Monday. The Nasdaq gained 1.1% on a tech rebound, the S&P 500 added 0.4% and the Russell 2000 0.3%, while the Dow slipped 0.1%. But the mood turned overnight as Korean chip stocks sold off. The charts of many US chip and AI stocks suggest the sell-off that began this month, and in some cases in late September, may not be over yet.
Traders need a reason to buy again, and third-quarter earnings could provide it. SpaceX, which now includes the AI lab xAI, reports after tonight’s close, followed by Meta and Tesla tomorrow. The results won’t tell the whole AI story, but many investors will act on them rather than wait for the rest of the sector.
The Fed Holds, for Now
Despite last week’s hot inflation figures, with producer prices at multi-year highs, markets now see an 83% chance that the Federal Reserve under its new chair, Kevin Warsh, holds rates at next week’s meeting. That supports shares in the short term.
But it carries a risk. If inflation keeps running hot and the Fed does nothing, it may have to act more sharply later. That could hurt Warsh’s credibility only months into the job.
Sterling Rises, the Euro Struggles
The dollar weakened across the board on Tuesday. Even the euro edged up against it, but it fell against the pound, and the euro-sterling exchange rate is back near a 17-month low. The French riots have exposed both the weakness of the French economy and the lack of a political solution voters will accept.
Sterling got a lift from a surprise fall in UK unemployment. The pound has risen about 1.7% against the dollar since dropping below $1.32 last Wednesday, and traders now eye $1.34. UK inflation figures are due tomorrow, followed next Wednesday by the first Budget from Chancellor John Healey. Markets put a 95% chance on a quarter-point rate rise from the Bank of England in November.
Oil Rises on War Headlines, Gold Slips
Oil rose again on a run of war news. Iran’s news agency Tasnim reported, citing the Revolutionary Guards, that two tankers had struck mines trying to cross the Strait of Hormuz. Yemen’s Houthis attacked a government military camp, and Russia reportedly struck an energy facility near Lviv in Ukraine.
Nearly eight months into the war between the US, Israel and Iran, which was expected to last little more than a month, there is no sign of peace, and a real risk it spreads. Oil has stayed fairly calm given the dangers. But with strategic reserves already drawn down, prices could break higher. That would push central banks to raise rates at the worst possible moment.
Gold, meanwhile, has fallen since Monday despite the weaker dollar and may test support around $4,100 again. A clean break would open the way to $4,000. The dollar index is holding a strong support band between 101.50 and 101.20. If the dollar resumes its rally, gold will struggle.
My Read
This is a market waiting for a verdict. The AI trade has lost momentum, and a failed flotation and a falling Kospi show how fragile confidence has become.
This week’s earnings matter more than usual. Strong numbers from SpaceX, Meta and Tesla could restart the buying. Weak ones would confirm what Asian markets are already signalling: investors are no longer willing to pay any price for AI. I’d expect more volatility, not less, until those results are in.
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