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Grim ASML outlook hits chip stocks

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Luxury giant LVMH result disappoints, cites weak China

spending

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Dollar near two-month high on measured rate-cut bets

(Updates prices at 1200 GMT)

By Amanda Cooper

LONDON, Oct 16 (Reuters) - Global stocks fell on

Wednesday after gloomy results from European heavyweights LVMH

and tech company ASML dented sentiment,

while the dollar gained as investors banked on a more moderate

decline in U.S. interest rates.

Investors have grown increasingly likely to punish shares

for earnings misses and Wednesday was no exception in Europe.

ASML, whose customers include TSMC and Samsung

, delivered a gloomy sales forecast for 2025 on

Tuesday, saying the semiconductor market beyond AI has been

weaker for longer than expected. Its shares fell by the most in

nearly 30 years in late trading and sank another 2.5% on

Wednesday.

Meanwhile, shares in LVMH, considered a play on the Chinese

consumer almost more than anything else, tumbled by the most in

a year after reporting weaker than expected third-quarter sales.

With the optimism over China's recent stimulus measures quickly

waning, the results were not what investors wanted to see,

leaving Paris' CAC 40 down 0.5% and the STOXX 600

down 0.2%.

A Bloomberg News report overnight that U.S. officials have

been considering implementing a cap on export licences for AI

chips to specific countries added to pressure on the chip

sector. It left indices in Japan, Taiwan and

South Korea - all home to major chip firms - down 1.7%,

1.2% and 0.6% respectively. Nvidia ( NVDA ) shares were up

around 0.5% in the premarket, having slid over 5% after hours.

S&P 500 and Nasdaq futures were flat, pointing

to a more stable open on Wall Street later, after Tuesday's

declines in the major indices .

Pepperstone market strategist Michael Brown said dips could

prove to be good buying opportunities.

"Providing that banks prove a reliable barometer for

earnings season more broadly, solid earnings growth, coupled

with resilient economic growth, should continue to power the

market higher. This is particularly the case with the forceful

Fed put providing additional confidence allowing participants to

remain further out the risk curve," he said.

With stocks within a whisker of record highs and valuations

looking pricey, analysts said there was plenty of scope for

volatility, not least because of the political backdrop.

Matt Simpson, senior market analyst at City Index, said

investors are likely questioning how exposed to risk they really

want to be, given there are risk events and a U.S. election

looming on Nov. 5.

"I expect investors to become increasingly twitchy as we

head towards November 5th, and keen (to) book profits at frothy

levels."

RISING DOLLAR

On the macro side, data earlier on Wednesday showed British

inflation slowed more than expected last month, cementing

expectations for the Bank of England to cut rates at least once,

if not twice, this year.

The pound fell below $1.30 for the first time in

two months, to $1.3032, while UK stocks got a lift, pushing the

FTSE 100 up 0.7% on the day.

The outlook for Federal Reserve monetary policy is at the

heart of the strength in the dollar right now.

Traders are pricing in around 46 basis points (bps) of rate

cuts this year. Less than a month ago, after the Fed lowered

rates by half a point, the expectation was for nearly 80 bps in

cuts.

As a result, the dollar has surged in recent weeks, with the

U.S. dollar index, which measures the U.S. currency

against six others, at 103.23, near its highest since early

August.

The euro traded around two-month lows and was last

at $1.08945 ahead of the European Central Bank policy meeting on

Thursday, at which the central bank is largely expected to cut

rates again.

Oil prices extended the previous day's 5% drop, as investors

contend with uncertainty around the conflict in the Middle East

and what it means for global supply.

Brent crude oil futures fell 0.6% to $73.78 a

barrel, while U.S. futures lost 0.7% to trade at $70.12.