Global equity markets are experiencing a significant rotation away from AI-exposed technology stocks toward defensive sectors and companies with more visible earnings. While US technology shares have suffered a sharp correction, European markets have shown relative resilience, Chinese equities remain under pressure, and Japan continues to deliver strong year-to-date returns despite recent weakness.
US equities are entering November on a cautious footing. The S&P 500 stands at 7,580.07, up 11.52% year-to-date, while the Nasdaq 100 trades at 28,384.85, up 13.16%. Despite maintaining a stronger annual performance, the Nasdaq 100 has declined 3.02% over the past week and 7.85% over the past month, compared with declines of 1.25% and 1.79%, respectively, for the S&P 500.
October was particularly difficult for large-cap technology stocks. The Nasdaq 100 fell 6.7%, its worst monthly performance since March 2025, while the equal-weight S&P 500 gained approximately 5%. This divergence highlights the scale of the rotation away from AI-related companies toward a broader range of sectors.
Disappointing earnings contributed to the selloff. Alphabet suffered a 13% single-day decline, erasing approximately $475 billion in market capitalization, while Intel fell nearly 30%. Earnings from Amazon and Intel also renewed concerns about the sustainability of AI-related capital expenditure. The Nasdaq 100 entered its third technical correction of 2026, following earlier declines during the outbreak of the Iran conflict and a summer semiconductor selloff. Defensive sectors, energy companies, and equal-weighted stocks outperformed.
European equities have demonstrated greater resilience. The Stoxx 600 stands at 646.75, up 11.68% year-to-date, while Germany's DAX has gained 5.21% to 25,818.21. France's CAC 40 remains the regional laggard, rising just 0.16% this year to 7,969.42.
October was a positive month for European markets, with the Stoxx 600 gaining 2.54%, the DAX 2.33%, and the CAC 40 1.01%. European equities outperformed the S&P 500 by approximately 2.9 percentage points during the month, supported by defensive companies, healthcare, and businesses with more predictable earnings.
France continues to face persistent political uncertainty, with the CAC 40 declining 7.12% over the past three months. Barclays strategists have identified France as the largest short position in Europe among systematic and discretionary funds.
The European Central Bank held interest rates unchanged at its October 29 meeting. President Christine Lagarde downplayed the risk of inflation spreading beyond energy, although officials remain prepared to consider a December rate increase if the inflation outlook fails to improve. Eurozone economic confidence declined to 96.9 in October, below the consensus estimate of 97.5, while elevated oil prices continue to weigh on the region.
UK equities have also demonstrated resilience. The FTSE 100 stands at 10,729.78, up 10.71% year-to-date, outperforming both the DAX and CAC 40.
The main domestic development was Chancellor John Healey's October 28 Budget, which was broadly in line with expectations. UK banks, including NatWest, Lloyds, and Barclays, rallied between 3.8% and 4.4% after the proposed bank surcharge increase proved smaller than feared. Homebuilders, however, declined as housing support measures disappointed.
The Bank of England's upcoming policy decision remains in focus. Budget measures addressing energy costs are expected to reduce inflation by only 0.1 percentage point, providing limited relief from inflationary pressures. The FTSE 100's defensive composition, with energy, consumer staples, and healthcare representing approximately 40% of the index, has helped insulate it from the global technology selloff.
Chinese equities are recovering modestly following a particularly difficult October. The CSI 300 stands at 4,016.92, gaining approximately 0.8% in the latest session, while the Hang Seng has risen 0.4% to 23,397.80.
Despite the rebound, the CSI 300 remains down 13.04% year-to-date and the Hang Seng 8.65%. October was the CSI 300's weakest month since January 2016, with an 8.5% decline and a record 12 consecutive weeks of losses.
The latest recovery follows reports that Chinese financial regulators will meet with major banks and securities firms to discuss capital-market support measures. Nevertheless, domestic demand remains weak. Third-quarter GDP grew 4.5% year-on-year, exceeding expectations, but the expansion was driven primarily by factory production and AI-related exports rather than household consumption.
Japan remains one of the strongest-performing equity markets in 2026 despite recent selling pressure. The Nikkei 225 declined 0.33% to 63,081.86, while the TOPIX fell 0.88% to 3,930.28.
The Nikkei remains up 23.59% year-to-date and the TOPIX 15.45%, although both have experienced significant monthly declines as the global technology selloff affects Japanese AI-related and banking stocks.
The Bank of Japan held its policy rate at 1.25% on October 30 but indicated that underlying inflation had reached its 2% target. Governor Kazuo Ueda signaled a strong possibility of a December rate increase, with more than 80% of economists surveyed by Bloomberg expecting a hike at the December 18 meeting.
The BOJ also announced plans to nearly triple its annual ETF sales to approximately ¥860 billion beginning in January. Meanwhile, the Yen remains near 158 against the Dollar, with Japanese authorities reiterating their readiness to respond to disorderly currency movements.
