Tech Sell-Off, U.S. Labour Softening, and Global Market Moves

U.S. Markets Overview

U.S. equities experienced significant volatility this week, with technology stocks posting their worst weekly performance since November, while small- and mid-cap stocks extended their strong year-to-date gains. Concerns emerged over a potential “software shock,” as large-cap tech companies appear increasingly overvalued and recent earnings failed to deliver particularly compelling forward guidance. Meanwhile, growth stocks outside of big-cap tech fared notably better. Historically, similar large tech drawdowns have coincided with a deteriorating economic outlook, a condition that does not appear to be supported by current economic data.

U.S. Data

This week’s U.S. labour market data largely came in below expectations. ADP reported that private payrolls rose just 22,000 in January, well short of forecasts, bringing total job creation for 2025 to 398,000—down sharply from 771,000 in 2024. The Labour Department’s JOLTS survey showed job openings fell to 6.542 million, the lowest level since September 2020, while hires edged up slightly and layoffs increased. Initial jobless claims for the week ending January 31 rose to 231,000, above expectations, signalling a modest softening in the labour market.

U.S. Earnings

Fueled by the broader U.S. tech sell-off, Advanced Micro Devices (AMD) plunged nearly 20% despite reporting strong headline results from Q4 2025. The sell-off reflects both the overall tech drop and investor concern about long-term earnings.

With NVIDIA (NVDA) still controlling an estimated 92% of the GPU market and maintaining a dominant position in the AI accelerators market, expectations remain high for AMD to show tangible progress in closing the gap. Given the concentration and arguably unsustainable nature of NVIDIA’s market share, investors are closely watching AMD’s product roadmap and pace of execution.

Crypto 

Bitcoin (BTC) dropped below $61,000, down from around $79,000 on Monday and 48% off its October peak, effectively erasing all the U.S. election gains. The decline was not limited to BTC, with most crypto currencies also falling sharply. Ethereum (ETH) and Solana (SOL) both lost more than 30% last week. The sell-off appears less a crypto-specific event and more a leveraged beta to tech, coinciding with the rout in technology stocks. Deutsche Bank similarly noted the decline reflects low investor confidence and a breakdown in cryptocurrencies’ traditional market relationships, with digital assets acting less as a haven and more as a leveraged bet on broader risk assets.

Commodities 

Commodity market headlines were dominated by developments in U.S.–Iran relations, given their potential impact on oil prices. Brent crude has trended gradually higher as the United States increased its military presence in the region.

Markets appear to view this conflict as a more significant risk to oil supply than the ongoing tensions in Venezuela. However, traders are pricing in more limited upside compared with the Iran–Israel conflict last June, likely reflecting greater focus on recent peace negotiations and the reduced probability of a major disruption to output.

Australia

The RBA raised rates to 3.85% as expected, following a strong jobs report and higher-than-anticipated inflation pressures. Governor Bullock’s speech later in the week signalled a hawkish stance, emphasising that further rate hikes remain possible if inflation proves persistent and the economy continues to operate near capacity. The market reaction was muted, as the hike was largely priced in. Going forward, the RBA will remain data-dependent, tightening policy to curb demand unless supply and productivity improve.

Europe

The overall view for European equities was positive, with the pan-European STOXX Europe 600 Index hitting a new intraday high and gaining 1.00%. Among major European stock indexes, Germany’s DAX rose 0.74%, Italy’s FTSE MIB gained 0.77%, and France’s CAC 40 advanced 1.81%. The UK’s FTSE 100 added 1.43%.

The European Central Bank (ECB) held rates steady at 2.0% for the fifth consecutive meeting. The bank reaffirmed its goal of stabilising inflation at 2% and noted that the economy was performing well in a challenging environment, while emphasising caution regarding any unforeseen developments in trade policy or geopolitical tensions.

UK

The Bank of England (BoE) took a dovish stance, holding policy rates at 3.75%, with four of the nine Monetary Policy Committee members unexpectedly voting to continue lowering rates. This follows December’s closely contested rate cut. Officials noted that while inflation is falling faster than expected and labour market pressures are easing, disinflation remains incomplete, cautioning against overinterpreting recent data. Markets are now pricing in roughly 45 basis points of easing by year-end, with about a 50% chance of a cut at the next meeting.

Japan

Japan’s stock market had a strong week, with the TOPIX Index rising over 3.7% and the Nikkei 225 gaining 1.75%, ahead of the lower house election on February 8. Domestic optimism was fueled by indications that Prime Minister Sanae Takaichi’s Liberal Democratic Party is on track to secure a standalone majority.

The yen weakened to around JPY 157 per U.S. dollar, down from roughly JPY 154.8 at the end of last week, as expectations grew that voters would back Takaichi’s agenda for aggressive fiscal expansion, including higher defence spending and potential tax cuts. Early remarks suggesting a weaker yen could benefit exports added further pressure, though she later clarified her preference for an economy resilient to exchange-rate fluctuations.

Concerns over Japan’s fiscal position, given elevated debt levels, pushed the 10-year government bond yield to its highest level since 1997, though yields remained largely range-bound around 2.23% over the week.

China 

Mainland Chinese equities had a similar story to the U.S., finishing lower on the back of poor tech performance and commodity volatility. The CSI 300 Index, China’s primary onshore benchmark, declined 1.33%, while the Shanghai Composite fell 1.27%. In Hong Kong, the Hang Seng Index posted a sharper drop, sliding 3.02%.

Private survey data from S&P Global pointed to a modest pickup in China’s activity in January. The S&P China Services PMI rose 0.3 points month-over-month to 52.3, its highest reading in three months, driven by stronger growth in new business supported by a renewed increase in export orders. The manufacturing PMI also signalled expansion for a second consecutive month, climbing to 50.3 from 50.1 in December, underpinned by higher new orders, improved employment, and the first rise in output charges in 14 months.

By contrast, PMI data from China’s National Bureau of Statistics painted a broader slowdown over the same period. The divergence largely reflects differences in survey composition, with the private PMI skewed toward export-oriented entities that have outperformed amid weak domestic demand. Economists surveyed by Bloomberg broadly expect the People’s Bank of China to ease monetary policy later this year.

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