Introduction: Software selloff goes global amid AI fears<\/p>\n
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/p>\n
A selloff in software and data company stocks that began in Europe yesterday has spread to Asia-Pacific markets, via the US, today.<\/p>\n
Software stocks slid from India to Japan, following losses on Wall Street overnight, on growing concerns that their business models will be devoured by AI.<\/p>\n
The trigger for the selloff appears to be an updated chatbot release from AI developer Anthropic, the company behind the chatbot Claude, designed to automate legal work such as contract reviewing, non-disclosure agreement triage, compliance workflows, legal briefings and templated responses.<\/p>\n
The news had an immediate impact in London yesterday, where information and analytics company Relx plunged 14%, UK publishing group Pearson fell by nearly 8%, and the London Stock Exchange Group fell by 13%.<\/p>\n
There\u2019s was a knock-on effect since. Last night in New York, Salesforce, Datadog and Adobe lost about 7%, Synopsys and Atlassian fell about 8%, and Intuit slumped 11%, as investors anticipated that their business models could be disrupted by AI.<\/p>\n
And now the selloff has swept around the globe. Shares of Indian information technology firm bellwether Tata Consultancy Services are down 6.8%, while Infosys has lost more than 8%.<\/p>\n
Chinese software companies dropped too, with Kingdee International Software down 12.5%.<\/p>\n
In Japan, economics data firm Nomura Research Institute fell 8%.<\/p>\n
The selloff has rattled markets that had only just recovered from the slump in gold and silver last week.<\/p>\n
Ipek Ozkardeskaya, senior analyst at Swissquote, says:<\/p>\n
The relief that came with the easing selloff across the metals space lasted until news broke that Anthropic, an AI startup backed by Amazon and Google, had rolled out a new AI tool designed to handle legal and research work traditionally done using paid databases.<\/p>\n
The announcement spooked markets, triggering a sharp selloff in software companies that sell data analytics and decision-making tools to lawyers, banks and corporates, on fears that AI and new players are coming for their lunch \u2014 and at an accelerated pace.<\/p>\n
The agenda<\/p>\n
9am GMT: Eurozone services PMI report for January<\/p>\n
9.30am GMT: UK services PMI report for January<\/p>\n
10am GMT: Eurozone inflation report for January<\/p>\n
10am GMT: House of Lords inquiry on stablecoins in the UK to hear evidence<\/p>\n
1.15pm GMT: ADP US private payroll report for January<\/p>\n
3pm GMT: US services PMI report for January<\/p>\n
Share<\/a><\/p>\n Updated at\u00a002.42 EST<\/p>\n Key events<\/p>\n Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/p>\n FTSE 100 rises over 10,400 points<\/p>\n Britain\u2019s FTSE 100 share index has now climbed over the 10,400 point mark for the frist time, as the rotation out of software stocks and into other sectors continues.<\/p>\n The blue-chip shares index has touched 10,419 points, a new intraday high, up 104 points or 1%.<\/p>\n Beazley (+8.4%) are sill the top riser, following Zurich\u2019s improved takeover proposal, followed by services firm DCC (+8.4%), and specialty chemicals group Croda (+4.3%).<\/p>\n Share<\/a><\/p>\n Updated at\u00a005.36 EST<\/p>\n Eurozone inflation rate drops as energy prices fall<\/p>\n Inflation across the eurozone has fallen below the European Central Bank\u2019s 2% target.<\/p>\n Statistics body eurostat estimates that annual inflation in the euro area fell to 1.7% in January, down from 2% in December, thanks to a fall in energy prices.<\/p>\n Eurostat says:<\/p>\n Services is expected to have the highest annual rate in January (3.2%, compared with 3.4% in December), followed by food, alcohol & tobacco (2.7%, compared with 2.5% in December), non-energy industrial goods (0.4%, compared with 0.3% in December) and energy (-4.1%, compared with -1.9% in December).<\/p>\n Share<\/a>UK services firms cut jobs in push for automation<\/p>\n Just in: UK service sector companies continued to cut jobs last month, as they turned to \u2018automation\u2019 rather than hiring new staff, a survey shows.<\/p>\n The latest poll of purchasing managers at UK services firms found that output growth rebounded in January to a five-month high, thanks to a \u201csolid increase\u201d in new work.<\/p>\n This lifted the S&P Global UK services PMI to 54.0 in January, up from 51.4 in December, showing the sector grew for the ninth consecutive month.<\/p>\n But despite improved business optimism, employment numbers decreased in January, extending a trend that began in October 2024.<\/p>\n Data provider S&P Global says firms are choosing not to replace voluntary leavers, pointing to \u201canecdotal evidence\u201d that this is due to squeezed margins, fragile market conditions and efforts to boost productivity through automation.<\/p>\n Tim Moore, economics director at S&P Global Market Intelligence, says:<\/p>\n \u201cThe latest survey revealed an encouraging start to 2026 for the UK service sector, following a sluggish end to last year. Output growth was the fastest for five months, supported by an uplift in investment sentiment and greater new order intakes. A number of firms suggested that post-Budget clarity had contributed to a broader improvement in client confidence, while some also cited rising export sales.<\/p>\n Despite a recovery in total new work, service providers still reported that consumer demand was constrained by squeezed disposable incomes, while risk aversion in response to geopolitical tensions was a factor holding back business spending.<\/p>\n Service sector companies appear cautiously optimistic about their growth prospects for the next 12 months, with confidence the highest seen since October 2024. However, there were again gloomy signals for the UK labour market outlook as staff hiring decreased at a steeper pace in January as firms looked to offset rising payroll costs. Another sharp increase in overall input prices contributed to the fastest rate of output charge inflation for five months.\u201d<\/p>\n Share<\/a><\/p>\n Updated at\u00a004.53 EST<\/p>\n Ben Barringer, head of technology research at wealth manager Quilter Cheviot,says investors are \u2018shunning\u2019 the software market due to uncertainty over AI\u2019s potential, and the disruption it could cause:<\/p>\n \u201cAll innovation means there is going to be disruption at some point, and we appear to be at a significant point in that journey for software and IT services companies. The launch of the Claude Cowork agent has sent share prices of these companies into a spin, and this is hurting other tech names too.<\/p>\n \u201cWe are not yet at the point where AI agents will destroy software companies, especially given concerns around security, data ownership and use, but this market rout suggests the potential disruption that is on the cards for markets in the coming days, weeks and months. There is a lot of uncertainty around exactly what AI agents can do, and as such investors are choosing to shun the software market altogether, leaving nowhere to hide.<\/p>\n \u201cSoftware companies have a number of options at this point. They could go out to the market and prove their businesses are not only stable but resilient to the AI disruption; they could look to merger with one another to build scale and aim to innovate; or, most importantly, they could integrate AI into their services and look to drive revenue from the technology, and thus insulating themselves from whatever impact these agents do bring.<\/p>\n \u201cThere is, however, a lot of uncertainty out there now and this could easily spread into other market. For now, old world economy stocks, such as energy and consumer staples, are doing well. But nevertheless, during times of volatility people often shoot first and ask questions later. As a result, this is not necessarily an isolated incident and further volatility is likely to come.\u201d<\/p>\n Share<\/a>AI sell-off continues in London<\/p>\n Software and data firms are under more pressure on the London stock market as AI fears ripple across trading floors.<\/p>\n Stocks vulnerable to AI disruption are among the big fallers on the FTSE 100.<\/p>\n Sage, maker of accountancy software, is down 3.8% this morning, followed by the London Stock Exchange Group (-3.7%), which provides financial data.<\/p>\n Relx, which owns legal information service LexisNexis, are down 1.6%.<\/p>\n Share<\/a><\/p>\n Updated at\u00a004.13 EST<\/p>\n This week\u2019s software selloff feels like a \u2018fire sale\u2019, says Saxo Markets\u2019 UK investor strategist Neil Wilson.<\/p>\n He says investors are struggling to value such companies, as AI disruption looms:<\/p>\n The sell software trade dominated the narrative on Tuesday in the US. IT research firm Gartner plunged -20% and hit a 52-week low after its full-year guidance missed expectations, and it was caught up in the broader selloff. Adobe slumped \u20137.31%, Salesforce \u20136.84%. This was carnage for these stocks. S&P Global, Intuit, Equifax and Moody\u2019s were all down sharply too and it had the feel of a fire sale because investors just no longer have any visibility or confidence in their models. S&P 500 software stocks are now \u201325% YTD and is at its lowest level since April…this is all about the growing dispersion in the AI trade. We don\u2019t know who\u2019s going to win or lose, and we don\u2019t yet know really how useful some of these tools are, but we reckon a lot of these firms are going to struggle to generate margin as AI will compress and compete away competitive advantage. To make a general point, there are clearly bargains with some of these names as some will be winners, but investors are turning backs because they are saying \u2018we don\u2019t know how to price these stocks\u2019.<\/p>\n This is not happening in isolation \u2013 software giants like these are totally wrapped up in the AI trade even if they are suffering because of the technological shifts. Software companies are customers of the likes of Amazon, Microsoft. In turn, they are the major customers of Nvidia, Broadcom, and in turn TSMC etc and so it goes on. So, we had a broader read across from the software hit with MSFT \u20132.87%, NVDA \u2013 2.84%, AMZN \u20131.79%, META \u20132.08%.<\/p>\n Share<\/a>Insurance takeover helps FTSE 100 to new record<\/p>\n Zurich\u2019s improved takeover offer for rival insurer Beazley (see earlier post<\/a>) has driven the London stock exchange to a new record high.<\/p>\n Beazley\u2019s shares are leading the FTSE 100 risers, up 8.6%, helping to push the Footsie over yesterday\u2019s high to a new peak of 10,383 points.<\/p>\n Beazley\u2019s shares have hit a new record of \u00a312.63 each, lifting the company\u2019s valuation to \u00a37.6bn.<\/p>\n That\u2019s still below Zurich\u2019s new \u2018agreement in principle\u2019 on a potential cash offer worth 1,310 pence in cash, though, even though Beazley\u2019s board say they\u2019re \u2018minded\u2019 to recommend it, should a firm offer be made.<\/p>\n The FTSE 100 will also be benefiting from the rotation out of software stocks and into other sectors.<\/p>\n Oil companies are also ralling, with BP up 2.3% and Shell rising 1.7%, as the oil price rises.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.37 EST<\/p>\n Novo Nordisk shares tumble after 2026 forecasts shock investors<\/p>\n Eek! Shares in Danish pharmaceuticals firm Novo Nordisk have plunged 18% at the start of trading, after it shocked investors last night with unexpectedly poor financial guidance.<\/p>\n After Europe\u2019s stock markets closed on Tuesday, Novo produced a stinker of a financial report \u2013 predicting its profits and sales could drop as much as 13% this year, the first declines in years.<\/p>\n Novo, maker of Ozempic and Wegovy, blamed the \u201cMost Favoured Nations\u201d agreement in the US which forced drugmakers to cut their prices, alongside increased competition in the weight loss sector and expiring patents.<\/p>\n Novo Nordisk CEO Mike Doustdar has told reporters this morning that the price reductions for its obesity drug Wegovy in the U.S. are \u201cpainful\u201d for the company\u2019s financial results.<\/p>\n Doustdar argues that they could be an investment in the future, as many more people will be able to get access to the medicines as a result.<\/p>\n Derren Nathan, head of equity research at Hargreaves Lansdown, says:<\/p>\n \u201cNovo Nordisk resorted to one of the oldest tricks in the books yesterday evening by trying to sneak out bad news when nobody was watching. But when you\u2019re Europe\u2019s biggest Pharmaceutical company and one of HL\u2019s five shares to watch for 2026, there\u2019s no place to hide. 2025\u2019s number contained no major surprises. Slightly better than expected sales, despite lower than expected pricing, led to an operating result in line with consensus, even as the company ploughed 3% more than forecast into its development programs. On the face of it, 2026 guidance was positive too, but much of that was down to anticipated accounting adjustments.<\/p>\n Underlying guidance (a new and welcome initiative for the company) was for sales and operating profit to fall 5-13% this year, causing the immediate erasing of much of the shares\u2019 strong gains so far in 2026. Donald Trump\u2019s crusade on drug prices, patent expiration, and competition all had their part to play. It wasn\u2019t all bad news, with an extremely strong launch for the Wegovy pill, and a reminder of strong clinical progress in the next-generation pipeline at the tail-end of 2025. But CEO Maziar Doustdar faces some tough questions when he takes the podium in his first full-year earnings call later today, particularly if arch rival Eli Lilly\u2019s results, due before Wall Street\u2019s open, paint a different picture. The hope will be that unlike his predecessor, he\u2019s getting all his bad news out of the way at the beginning of the year.\u201d<\/p>\n Share<\/a><\/p>\n London-listed companies exposed to Anthropic\u2019s new legal plug-in are under a little more pressure at the start of trading.<\/p>\n The London Stock Exchange Group are down another 1.1% (after falling 13% yesterday), while Relx are down 0.5% (after Monday\u2019s 14% drop).<\/p>\n Share<\/a><\/p>\n Yesterday\u2019s software sell-off marked \u201ca dramatic acceleration\u201d of the recent trend, says market strategist Jim Reid of Deutsche Bank, adding:<\/p>\n It means the 9 worst-performing companies in the S&P 500 YTD are all in the software and related services sectors, having now seen declines of 25% or more.<\/p>\n While the question over the end-winners from AI is unlikely to be answered in 2026, recent months have seen a clear shift in markets from AI euphoria towards more differentiation between companies, and growing concern about its disruption to existing business models.<\/p>\n Share<\/a>Zurich and Beazley reach initial agreement on \u00a38bn deal<\/p>\n In the insurance world, Zurich appears to have won its battle to aquire smaller rival Beazley after increasing its offer price.<\/p>\n The two companies have told the City this morning they\u2019ve reached \u201cagreement in principle\u201d on the key financial terms of a possible recommended cash offer, which values Beazley at \u00a38bn.<\/p>\n At 1,310 pence in cash plus a 25p dividend, that\u2019s almost 60% higher than Beazley\u2019s closing share price on 16 January, the last business day before Zurich\u2019s interest was public.<\/p>\n Zurich had earlier offered 1,280p a share, but has now bumped it up.<\/p>\n Beazley\u2019s board says it would be minded to recommend the new offer to shareholders, should a firm bid be made \u2013 once Zurich has completed its due diligence on the bid.<\/p>\n Beazley offers specialist insurance products, across areas including cyber, professional indemnity, property, marine, and reinsurance, and had batted away several previous wooings from Zurich.<\/p>\n Share<\/a>Nvidia’s Huang dismisses fears AI will replace software tools<\/p>\n Nvidia CEO Jensen Huang has dismissed fears that artificial intelligence will replace software and related tools, calling the idea \u201cillogical\u201d.<\/p>\n Speaking at an artificial intelligence summit in San Francisco hosted by Cisco Systems, Huang said worries that AI will make software companies less relevant are misguided and AI will continue to rely on existing software rather than rebuild basic tools from scratch, Reuters reports.<\/p>\n Huang said.<\/p>\n \u201cThere\u2019s this notion that the tool in the software industry is in decline, and will be replaced by AI … It is the most illogical thing in the world, and time will prove itself,\u201d<\/p>\n \u201cIf you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools … That\u2019s why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit.\u201d<\/p>\n