By Amanda Cooper
LONDON (Reuters) - Global shares fell on Thursday, after Facebook (NASDAQ:META) owner Meta Platforms and Microsoft (NASDAQ:MSFT) both warned of rising costs for artificial intelligence, while evidence of strong U.S. economic growth continued to underpin the dollar.
Big Tech's warnings stoked worries among investors that the pay-off for heavy spending on AI may take longer than many had hoped. And with Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) due to report later in the day, the mood was cautious.
In currencies, the dollar fell back from three-month highs against the yen after the Bank of Japan kept interest rates on hold as expected, but carried a hawkish tone, prompting some analysts to raise the possibility of a December rate hike.
Investors were also treading warily ahead of U.S. non-farm payrolls data on Friday, the presidential election next Tuesday and a Federal Reserve policy decision on Thursday.
Data on Wednesday showed the U.S economy grew by an annualised 2.8% in the third quarter, topping the 2% mark for the eighth quarter out of the last nine, according Pepperstone strategist Michael Brown.
S&P 500 futures eased 0.7%, while Nasdaq futures fell nearly 1.0%, suggesting more losses on Wall Street at the open. Shares in Microsoft and Meta, which have risen 15% and 67%, respectively, so far this year, fell in premarket trading by 3-4%.
"We’ve seen it time and time again. We have these set-backs that have proved to be buying opportunities. The question now is are we at such a level in the market where investors aren’t going to be rushing to buy up the stock and much more likely to stand aside," Trade Nation market strategist David Morrison said.
"There are so many excuses for not increasing your exposure to the market right now and the tech earnings have put the cherry on the top," he said.
AI posterchild Nvidia is the last of the so-called "Magnificent 7" megacap tech companies to report earnings, in about three weeks from now. Tesla (NASDAQ:TSLA) reported last week, with Alphabet (NASDAQ:GOOGL) following on Tuesday.
FRAGILE NERVES
In Europe, the STOXX 600 fell 0.85% to its lowest in seven weeks in a heavy day for earnings, as a drop in shares of French lender BNP Paribas (EPA:BNPP) after results and in tech stocks like ASML (AS:ASML) and SAP offset a bounce in energy and the wider banking sector.
In terms of macro risk events, the U.S. personal consumption expenditures index, the Fed's preferred measure of inflation, is due later on Thursday.
Meanwhile, in the final stretch of the U.S. presidential election contest, opinion polls still put Republican Donald Trump and Democrat Kamala Harris neck-and-neck, although financial markets and some betting platforms have been leaning towards a Trump victory.
The dollar index traded around 104, just below Tuesday's near three-month highs. The U.S. currency fell by the most against the yen, down 0.4% to 152.825, although that was still not far from this week's high of 153.885.
The dollar is set for a rise of nearly 6.5% against the yen in October with political uncertainty in Japan after the coalition government lost its majority in parliamentary elections at the weekend potentially hampering the BOJ's efforts to normalise monetary policy.
"It supports our forecast for the BoJ to raise rates sooner than current market expectations, although we have pushed back the timing of our forecast for the next rate hike from December to January in light of recent political instability in Japan," MUFG currency strategist Lee Hardman said.
"One final rate hike this year can’t be completely ruled out if the yen weakens sharply after the U.S. election," he said.
Japan's Nikkei share average closed down 0.5%. South Korea's Kospi dropped 1.5%, shrugging off a late recovery in Samsung (KS:005930) shares after the consumer electronics company said it was making headway in AI chip supply.
Gold reached a fresh all-time high of $2,790.15 per ounce, while oil prices were up 0.5% at $72.90 a barrel after weekly data showed an unexpected drop in fuel inventories that offered some reassurance about energy demand.