Stocks sink on fears over tech rally, US rates

London (AFP)

Global stock markets sank on Friday as doubts built over next month's US Federal Reserve interest rate decision and persistent speculation about a tech bubble.

UK government bonds and the pound slid following reports that finance minister Rachel Reeves has scrapped plans to hike the income tax in her key budget this month.

Analysts said the reports heightened concerns about the health of the UK's public finances.

London's FTSE 100 index shed more than one percent, along with Paris and Frankfurt.

That tracked sharp losses in Asia and on Wall Street.

"It's certainly been a volatile week... with relief over the end of the (US government) shutdown vying with concerns over AI valuations and whether the Fed will cut rates again," said Jim Reid, managing director at Deutsche Bank.

Traders trimmed bets on a December rate cut after several Fed officials voiced concerns about cutting borrowing costs while inflation remained stubbornly high.

For much of the year, equities have been boosted by optimism that rates would come down, and the Fed has delivered at its past two meetings.

But comments from Fed boss Jerome Powell last month that a December repeat was not "a foregone conclusion" sowed the seeds of doubt.

Investors also awaited the release of economic data that had been held up by the record US government shutdown, with jobs and inflation the main focus, even though some are expected to be incomplete.

All three main indexes on Wall Street ended on Thursday in the red, with the tech-rich Nasdaq down more than two percent.

In Asia, Tokyo, Sydney, Singapore, Wellington and Bangkok all shed at least one percent.

Seoul -- which has hit multiple tech-fuelled records of late -- shed nearly four percent, and Manila more than two percent.

Shanghai was hit by fresh data showing growth in Chinese retail sales slowed in October for the fifth successive month.

Oil prices rallied more than two percent on Friday, rebounding days after the commodity tumbled on OPEC's monthly report which forecast an oversupply in the third quarter.