This was the week the market’s excitement over artificial intelligence didn’t just cool — it hit a wall. A sharp, synchronized pullback unfolded across global markets, driven not by weak earnings or bad data, but by a sudden psychological shift. Investors reevaluated what now look like overstretched valuations.
Ironically, this happened during a week of blockbuster earnings — including record-breaking results from NVIDIA — and surprisingly strong macro data. But none of that could counter the change in sentiment. Valuation anxiety became the dominant market force.
Below, we break down the week region by region, preview a packed and slightly chaotic data calendar, and outline the top five risks you must watch.
United States: A Violent Tech Reset Despite Strong Data
The US saw the most severe declines. The S&P 500 fell 1.94 percent and the NASDAQ dropped 2.74 percent, led by the same mega-cap tech stocks that powered this year’s rally.
At the center of it all was NVIDIA. The company posted record revenue, confirmed that AI demand remains strong, and issued a robust Q4 outlook. Normally this would validate the entire AI sector. Instead, the stock closed down 3 percent.
This wasn’t profit-taking. It was valuation compression. Markets have priced in several years of flawless exponential growth. When investors begin applying a higher discount rate to those future profits, today’s valuation falls — even with perfect current earnings.
Labor data added nuance. Payrolls rose 119,000, above forecast, but unemployment climbed to 4.4 percent — the highest since 2021. That single crack in the labor market gave the Federal Reserve room to sound more cautious.
Dovish comments from New York Fed President John Williams caused the probability of a December rate cut to surge from around 30 percent to roughly 72 percent in just two sessions. The VIX spiked to 28 before settling around 23.
Bottom line: strong earnings and solid job growth weren’t enough to offset growing skepticism around AI valuations and the fragile macro backdrop.
Europe: Strong Fundamentals Overridden by Global Fear
Europe followed the US lower. The STOXX Europe 600 fell 2.21 percent, even though local fundamentals were surprisingly resilient.
The Eurozone composite PMI rose to 52.4 — indicating expansion — and consumer confidence reached an eight-month high. France’s PMI even inched toward neutral.
But none of it mattered. The US tech-driven correction overpowered the region’s improving economic picture.
In the UK, headline inflation eased to 3.6 percent, its lowest level in four months. But Bank of England officials pushed back on expectations for rate cuts. Wage inflation remains too high, and the BOE is not ready to ease.
That hawkish tone, combined with global risk aversion, prevented Europe from benefiting from its own good news.
Asia: Big Divergence Between Japan and China
Japan: Massive Fiscal Stimulus Meets Currency Strain
Japan’s Nikkei dropped 3.48 percent, weighed down by global tech weakness. But Tokyo responded aggressively. The government unveiled a massive 21.3 trillion yen fiscal package (around $135 billion), targeting AI development, shipbuilding, and household support.
Markets welcomed the long-term ambition but worried about debt and inflation. The yen weakened to 156.7 per dollar. Core CPI remained sticky at 3.0 percent.
However, Japan’s domestic momentum improved, with the Reuters Tankan index jumping to +17 — its highest reading since 2021 — signaling stronger business confidence.
China: Property Pain Deepens as Growth Momentum Fades
China faced the sharpest selloff in Asia. The Shanghai Composite fell 3.9 percent, while the Hang Seng dropped 5.09 percent.
Key data disappointed:
Industrial production missed expectations
Retail sales slowed for the fifth straight month
Fixed asset investment fell 1.7 percent year-to-date — the worst on record
The property downturn is intensifying. New home prices fell at the fastest pace in a year, and weakness has now spread into the banking system. Fitch expects Chinese bank asset quality to deteriorate into 2026.
With credit conditions tightening, domestic demand weakening, and policy support still vague, sentiment remains fragile.
The Week Ahead: Thanksgiving Liquidity, High Volatility
A holiday-shortened week in the US often brings outsized market swings due to thin liquidity. But this week also brings a dense data calendar — and some releases may still face delays due to the previous government shutdown.
United States
Retail sales, consumer confidence, and especially the Producer Price Index (PPI) will drive the narrative.
A hot PPI reading on Wednesday could immediately challenge the recent dovish pricing in the bond market.
Europe
Friday’s flash inflation readings for France, Germany, and Italy will determine the tone for the ECB’s December meeting.
China & Japan
China: all eyes on potential concrete property support measures
Japan: the yen’s trajectory and details of fiscal deployment will shape global FX sentiment
Top Five Global Risks to Watch
Acceleration of the AI Valuation Reset
If analysts begin lowering long-term earnings forecasts, the tech correction could broaden and intensify.Reversal in US Rate Cut Expectations
A hot PPI print or hawkish Fed comments could unwind the bond rally and pressure equities sharply.European Inflation Surprise
If flash CPI reaccelerates, the ECB may be forced to hold rates high for longer — lifting bond yields.Deepening China Property Stress
If home prices keep falling, defaults and tighter credit could drag global growth lower.Japan’s Fiscal Push Weakening the Yen
A sharp yen slide risks triggering carry-trade unwinds and FX volatility across emerging markets.
Frequently Asked Questions
Why did NVIDIA fall despite perfect results?
Because long-term AI valuations were too stretched. Investors repriced future cash flows, not current earnings.
Does rising US unemployment mean recession?
No — but it does indicate growing labor market softening, which influences the Fed’s tone.
Is Europe entering a recession?
Not at the moment. PMI data confirms expansion, but global market psychology overpowered local fundamentals.
Why is China’s slowdown so impactful globally?
Because tighter Chinese credit conditions reduce demand for commodities, machinery, and exports worldwide.
Is Japan’s stimulus positive for markets?
Long-term, yes. Short-term, it pressures the yen, which can introduce global FX volatility.
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