Global equities slump as SpaceX shares reverse IPO gains and Fed rate fears mount

Global equity markets declined on Monday and Tuesday, driven by a sharp correction in major technology stocks and broader macroeconomic headwinds. Alphabet and Amazon each fell approximately 5%, dragged down by concerns over lofty artificial intelligence spending, rising debt, and hawkish Federal Reserve interest rate expectations. The S&P 500 and Nasdaq were pulled lower as investors rotated out of high-spending tech giants, while chipmakers such as Micron performed relatively better ahead of their results.

SpaceX experienced its largest loss since its initial public offering, with shares dropping around 16% on Monday as the company announced debt-raising plans. The stock reversed all its initial trading gains, falling below its first print after opening at US$150 per share following a record-breaking IPO priced at US$135. Although the shares remained 14% higher than the listing price, they fell a further 2% in after-hours trading, threatening the company’s newfound US$2 trillion market valuation and concerning retail investors who pumped tens of millions into the stock last week.

The tech selloff rippled across Asia, with South Korea’s KOSPI index falling nearly 10% on Tuesday. The decline was partly attributed to warnings about the ongoing weakness of the Korean won and the broader drag from Wall Street, where Nasdaq futures tumbled more than 2% before the bell. Investors are now fully pricing in a Federal Reserve rate hike for September, with more than a 50% chance of two hikes by year-end, weighing on valuations globally.

In currency markets, the yen weakened to 40-year lows against the US dollar, as Fed-fuelled dollar strength trumped the impact of last week’s Bank of Japan rate hike. Reports of contact between Tokyo and Washington officials on yen stability kept intervention fears on the boil. Meanwhile, oil prices continued their slide under US$80 per barrel, with Brent crude trading around US$77 per barrel early on Tuesday. The drop followed reports of returning oil flows through the Strait of Hormuz and a US waiver of sanctions on Iran for 60 days following initial peace talks.

In the UK, Prime Minister Keir Starmer resigned on Monday, though markets remained relatively stable as attention shifts to the appointment of his likely successor, Andy Burnham. Focus is now on how quickly Burnham can be appointed and who he might choose as finance minister. Tuesday’s data slate includes the release of flash US and global business surveys for June, though the significant retreat in oil prices occurred after those polls were conducted.