Global recession fears spike as Wall Street stocks plummet amid concerns of AI investment bubble

Bitcoin and Asian shares fell sharply on Tuesday after Federal Reserve Board of Governors member Christopher Waller warned of "eye-popping" redundancy numbers across major US firms.

The digital currency dropped below $90,000 for the first time in seven months, indicating nervousness in the markets, which were filled with risk-averse investors.

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US stock futures also fell as analysts await the publishing of the country's September employment data on Thursday, which has been considerably delayed due to the record-breaking US Government shutdown.

Investor nerves have also been spiked by concerns of an Artificial Intelligence (AI) bubble, which may be on the verge of bursting and sharply toppling shares as a result.

An indicator of this will be found in a key earnings report by Nvidia, a leading company in the AI world, which will be published on Wednesday.

Concerns over tech stocks also caused a sharp decline in Japanese markets, with the Nikkei falling by 3 per cent and chip maker Tokyo Electron dropping by 5.4 per cent.

In South Korea and Taiwan, the Kospi dropped 3.1 per cent to 3,960.82 and the Taiex plunging 2.3 per cent, respectively.

The FTSE-100, an index of the biggest 100 UK firms listed on the London Stock Exchange, was down 94.63 at 9580.80 at 8:15am.

Investors have dumped UK stocks at the steepest rate since Liz Truss' mini-Budget in October 2022, according to the Bank of America.

It comes as fund managers brace for Rachel Reeves' fiscal statement next week, where she is expected to raise taxes and target pensions.

On Friday, borrowing costs ramped up after reports that the Chancellor is no longer planning to put up income tax to fill gaps in the public finances.

The current global market turmoil has led traders at Kalshi, an exchange and prediction market, to forecast recessions in the US, UK, Japan, China and India.

Prem Raja, head of trading floor at Currencies 4 You said: "Markets are currently trading on recession fears rather than inflation risks. Waller's warning about large-scale redundancies has rattled sentiment because it hints that corporate America is preparing for a deeper downturn.

"That has triggered a broad risk-off move across equities and even Bitcoin, which often trades like a high beta asset. There is also growing concern that certain aspects of the AI trade are overvalued.

"With NVDA reporting earnings on Wednesday, we expect significant volatility. Investors are reassessing earnings expectations, credit conditions and the Fed's path, and the worry is that weakening labour demand feeds into softer spending and slower growth from here."