Bloomberg Daybreak: Europe Edition
Biggest Selloff Since 2020, $2.3 Trillion Erased, Aircraft Bomb Threats In Europe
· Summarized
Key takeaways
- The AI trade’s immediate shock came from the prospect that Democratic election gains could produce tougher U.S. regulation of AI and data centers, extending uncertainty beyond this year’s earnings into 2028 and 2029.
- The selloff was not confined to AI stocks: crowded hedge-fund trades unwound, Asian markets saw extreme price action, and investors rushed for institutional liquidity.
- A 6% S&P 500 decline was described as manageable by Dan Niles, but Bloomberg Economics estimated that a 20% fall could erase $1.6 trillion from global GDP and damage hiring and consumption.
- The Bank of England is more likely to raise rates again if war-related energy prices stay high, while France faces rising protest pressure and a stalled budget process.
- European flight disruptions and the Binance theft remain unresolved in different ways: authorities found no bombs and no confirmed attacker, while investigators are still tracing the crypto hack’s failure points and laundering methods.
Summary
AI selloff spreads from Wall Street across Asia
A U.S. market plunge spread through Asia as investors feared Democratic election gains would bring tighter AI and data-center regulation. The MSCI Asia-Pacific Index fell 3.8%, Japan’s Nikkei dropped 6%, and South Korea’s Kospi fell as much as 8.8%, triggering a circuit breaker, after the Nasdaq 100 lost 6.4% and $2.3 trillion in value. Bloomberg analyst Mandeep Singh said semiconductor companies had benefited from supply-demand-driven pricing growth that may not continue. U.S. futures later suggested some relief.
Investors questioned whether AI’s political risk has changed the trade
Bloomberg reporters said AI companies and data-center users had largely funded Republicans, leaving them exposed to Democrats who won without AI money and may be less politically beholden to the industry. Candidates including Abdul El-Sayed, Sherrod Brown, Will Lawrence, and Manny Rutanel campaigned on restraining AI. El-Sayed proposed transferring half the equity of leading AI firms into public ownership, while an exit poll of about 100,000 voters found more than half considered AI and data centers a major election factor.
Billionaire fortunes fell sharply in the technology rout
Nvidia CEO Jensen Huang dropped out of the global ten richest people after losing $15.1 billion, leaving him with $150.9 billion. Elon Musk lost $79.7 billion and Larry Ellison lost $10.1 billion, while the 500 people tracked by Bloomberg’s Billionaires Index lost $185 billion in total on Thursday. Bloomberg’s Eric Weiner said the new Democratic political environment could allow states to reject data-center projects and reconsider them only if voters later demand them.
A 20% S&P 500 fall could erase $1.6 trillion from global GDP
Bloomberg Economics modeled a larger AI-driven crash and estimated that a 20% decline in the S&P 500 could reduce global GDP by $1.6 trillion. Niles Investment Management founder Dan Niles said the current 6% decline from the index’s early-October peak was not yet a major correction, though investors using three-times-leveraged semiconductor positions could have been badly damaged. Economists warned a deeper fall could hurt hiring and consumer spending and trigger recession.
Hedge funds rushed to unwind crowded positions
The selloff hit hedge funds after strategies designed to behave independently began losing money simultaneously, exposing leverage and crowded trades that had been masked by earlier AI gains. ExodusPoint Capital Management fell 2.4% in October, reducing its annual gain to 1.6%, while Balasny Asset Management dropped 3.4%. Bloomberg reported that funds were raising cash, and risk managers could force further selling in otherwise healthy positions, potentially spreading the damage.
Bailey said another Bank of England hike was more likely than not
Bank of England Governor Andrew Bailey said a second rate increase was “probably more likely than not” if energy prices remain elevated because the Iran war continues. The bank had just raised borrowing costs to 4%, its first increase in three years, and all nine Monetary Policy Committee members supported the move. Bailey said he hoped progress toward ending the conflict would bring energy prices down and be reflected in market pricing.
French cost-of-living protests intensified as the budget stalled
France’s Interior Ministry said 575,000 people attended nearly 200 cost-of-living protests on Thursday, the largest daily turnout since unrest began in September. Bloomberg’s Alan Katz said parliamentary budget negotiations were likely to produce political theater rather than action because parties in the divided National Assembly have little incentive to cooperate before next year’s presidential election. France’s deficit is expected to reach 5.4% of GDP this year, while borrowing costs add pressure.
Binance hackers took $2.5 billion in one transaction
Hackers who stole more than $6 billion from Binance reportedly extracted almost half—about $2.5 billion—in one transaction, paying only about $15 in network fees. They exploited a wallet feature that moves money on an account’s behalf without requiring authorization for each transfer. Bloomberg said the North Korea-linked group targeted an employee’s laptop through fake job postings, malicious code, and social engineering; investigators have not established all points of failure, while AI may have appeared later in laundering the funds.
Unapproved peptides moved through a billion-dollar gray market
The Bloomberg Tech Minute reported that Americans are using peptides—short amino-acid chains that act as biological signals—for mental clarity, cognitive benefits, competitive advantage, and aging concerns. Insulin and semaglutide are FDA-approved, but unapproved peptides marketed as research chemicals cannot legally be imported or sold for human use in the United States. Consumers instead turn to online forums, social media, AI, and overseas vendors with questionable credentials, creating a billion-dollar do-it-yourself medicine market.
European airlines faced a second wave of bomb threats
More than a dozen, nearly 20, European flights were diverted or searched on Thursday, including flights in Finland, Poland, and Romania; one was sent to a French military base, but no bombs were found. Bloomberg aviation editor Benedict Kamel said the incidents began with sporadic scares Tuesday but accelerated the next day. Authorities had not identified a perpetrator or confirmed a coordinated Russian hybrid-warfare campaign, though drone incursions and other unexplained incidents have heightened public anxiety.
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Show notes
Your morning briefing. All the news you need to start your day.
On today's podcast:
(1) The fears had shadowed Wall Street off and on for months. Then, all at once, everyone rushed for the exits. The hardest hit were the companies at the heart of the artificial-intelligence boom.
(2) Jensen Huang got an expensive taste of the Democratic Party’s newfound political power Thursday. The Nvidia Corp. CEO’s net worth fell by $15.1 billion to $150.9 billion as stocks tumbled. Other big losers were SpaceX’s Elon Musk and Oracle Corp. co-founder Larry Ellison.
(3) Japan’s Nikkei 225 Stock Average slumped Friday, putting the tech-heavy gauge on course to enter a technical bear market as investors unwind artificial intelligence-related trades.
(4) Bloomberg Economics modelled what an AI market crash might look like. If the S&P 500 were to drop by 20%, it could wipe 1.6 trillion dollars from global GDP.
(5) Hedge Fund strategies designed to behave independently suddenly lost money in lockstep, exposing crowded positions, heavy leverage and vulnerabilities that had been easier to overlook during the long ascent of AI-linked stocks.
(6) Bank of England Governor Andrew Bailey said another interest-rate hike is more likely than not if the high energy costs seen in recent weeks return.
(7) French protests over the cost of living showed no signs of losing steam on Thursday, raising the pressure on the government as it struggles to push a budget through parliament.
(8) The hackers who stole $6.3 billion from Binance last week found a way to take 40% of the stolen cryptocurrency in one hit, reducing their chances of being caught in the act, and it cost them just $15.
(9) More than 10 flights were forced to divert or were searched by authorities after European airlines suffered a second wave of bomb threats in a week.
Podcast Conversation: Goldman Traders Say Phones ‘Are Exploding’ as AI Selloff Worsens
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