Here’s a neat ‘chart of the day’ from Deutsche Bank this afternoon, showing the drawdowns from their 52-week highs for selected US tech and tech related stocks, and some private equity firms who have exposure.
There have been “some brutal moves”, points out Deutsche’s Jim Reid, adding:
An additional stand out is that the Mag 7 index as a whole is only about -1% off its peak, even though six of the seven names are down between -5 and -25%. The outlier, Alphabet, is up nearly +25% over the last three months and roughly +75% over the last six. That +75% translates into around $1.7 trillion in market value.
Shares in Uber have dropped 5% in early trading, after missing profit forecasts despite record demand for rides.
Uber reported earnings per share of $0.71 in the last quarter of 2025, a rise of 27%, but below forecasts of $0.79.
Looking ahead, it expects adjusted EPS of 65 cents to 72 cents in the current quarter, with the entire range below the FactSet consensus of 75 cents.
The disappointing earnings came despite revenue rising above forecasts, with quarterly trips and gross bookings both up 22% year-over-year.
Dara Khosrowshahi, CEO, says:
“Uber accelerated into another record-breaking quarter, with more than 200 million monthly users completing more than 40 million trips every day—our largest and most engaged consumer base ever.
“We enter 2026 with a rapidly growing topline, significant cash flow, and a clear path to becoming the largest facilitator of AV trips in the world.”
Business activity growth in the US services sector picked up in January amid a stronger rise in sales, the latest poll of purchasing managers shows.
January’s S&P Global PMI survey of US private service sector companies shows there was a steeper uplift of new work last month. However, consumer confidence remained subdued.
The US services PMI rose to 52.7 in January, up from 52.5 in December, showing the sector has been expanding for three years.
The report says:
Tariffs and economic uncertainty nonetheless limit growth rates
Employment numbers increase marginally
Inflation rates remain elevated, but weaken since end of 2025
AMD shares slide 12%
Chipmaker AMD (-12%) and software firm AppLovin (-13.2%) are leading the fallers on the Nasdaq index.
AMD is out of favour after its first-quarter forecast fell short of some analyst expectations last night. while AppLovin is casualty of the fears over AI’s impact on the software sector.
Wall Street open
The main US stock indices are mixed at the start of trading, as investors rotate out of technology stocks and into other sectors.
The Dow Jones industrial average, of 30 large US companies, was up 198 points or 0.4% at the open to 49,439 points.
Biotech firm Amgen (+3.2%) are the top riser, followed by paint and coatings firm Sherwin-Williams (+2.2%) and construction equipment maker Caterpillar (+2%).
Tech firms are lagging, though, with IBM (-3.9%) and Salesforce (-2.4%) leading the fallers.
The broader S&P 500 index is flat, while the tech-focused Nasdaq is down 0.23%.
The FTSE 100 is heading even higher as traders in New York prepare to begin work.
The UK’s blue-chip stock index is now up 147 points, or 1.4%, at 10,461, a new intraday peak.
Dr Nela Richardson, chief economist at ADP, also reports that hiring slowed across American companies last year:
“Job creation took a step back in 2025, with private employers adding 398,000 jobs, down from 771,000 in 2024. While we’ve seen a continuous and dramatic slowdown in job creation for the past three years, wage growth has remained stable.”
Hiring slows at US companies in January
Hiring across American companies slowed last month, as professional and business services firms, and manufacturers, shed jobs.
Payroll operator ADP reports that private sector employment increased by 22,000 jobs in January, down from 37,000 in December.
Professional and business services companies lost 57,000 jobs in the month, while manufacturing employment fell by 8,000.
That mostly wiped out a 74,000 increase in headcount at education and health services.
ADP says:
In a lackluster month for hiring, the education and health services sector was a standout, adding 74,000 jobs. Leading the slowdown was manufacturing, which has lost jobs every month since March 2024, professional and business services, and large employers.
Normally, the ADP report sets the scene for the official US jobs report on Friday. However, this month’s non-farm payroll report has been delayed by the latest US government shutdown.
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Dutch firm Wolters Kluwer, which provides analytical data services, to the legal industry is also under pressure again today.
Its shares fell 3% in morning trade, but are now down just 0.5%, adding to its 12% drop yesterday when Anthropic’s new legal plug-in service hit the software sector.
US pharmaceuticals firm Eli Lilly has beaten Wall Street estimates for its fourth-quarter earnings and revenue.
The company’s 2026 guidance has also exceeded forecasts, thanks to demand for its weight loss drug Zepbound and diabetes treatment Mounjaro (one factor behind Novo Nordisk’s struggles – see earlier post).
Max Stanyard, healthcare and life sciences senior analyst at RSM UK, says:
“The significant jump in Eli Lilly’s revenue is driven by growth in sales of its obesity and diabetes medications, which shows no sign of slowing down. The FDA approval of its new oral obesity medication – targeted for April 2026 - combined with broader coverage of existing obesity medications by the US Medicare and Medicaid plans, will propel future growth.
Yen weakens ahead of Japan's elections
The Japanese yen has been weakening again today, ahead of the snap election scheduled for 8 February.
Investors are anticipating that voters will support new prime minister Sanae Takaichi, who is pledging more spending, tax cuts and a faster defence build‑up.
Takaichi’s promise to tackle the cost-of-living crisis is appealing to younger voters, who are attracted by promises of tax relief, including raising the income-tax threshold and expanding deductions aimed at boosting take-home pay.
The yen was 0.68% lower at 156.80 per dollar earlier today, its weakest since 23 January.
American Golf sold to Peter Jones
In the leisure world, Dragons’ Den star Peter Jones has bought American Golf, the UK’s largest specialist golf retailer.
Jones and his investment group acquired American Golf – which despite its name was founded in a garden shed in Warrington in 1978 – earlier today, from private equity firm Endless.
American Golf employs more than 1,000 people, and operates more than 80 bricks-and-mortar stores in the UK and Ireland as well as selling golf equipment online.
Jones says:
“Golf has always been a personal passion of mine, so acquiring American Golf feels especially meaningful. It’s a brand that truly understands golfers — from beginners to seasoned players — and has played an important role in the UK golf community for decades.”
Nigel Oddy, CEO of American Golf, says the deal will help the company accelerate its growth strategy. He was brought in by Endless to run American Golf after it collapsed into administration under its previous owner in 2018.
Oddy’s turnaround plan included selling off its six golf courses, and focusing on its stores – see here for more:
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Gold back over $5,000/oz
Elswhere in the markets, gold is back over the $5,000 an ounce level.
That’s the latest move in a few very volatile days in the precious metals market.
Gold first rose over the $5k mark at the start of last week, as it rocketed to a record high near $5,600/oz – before tumbling on Friday, and then hitting a low of $4,403/oz two days ago.
After being driven higher by speculative buying, gold may now be acting as a safe-haven again.
Raffi Boyadjian, Lead Market Analyst at Trading Point, says:
Yesterday’s tech rout boosted gold, which surged 5.9% to just under $5,000, and the precious metal is extending its gains today, crossing back above that crucial threshold. Gold’s more than 20% crash from last week’s record high to Monday’s intra-day low appears to have been a short-lived panic, as the price has already retraced more than 50% of that drop.
Geopolitical tensions are likely supporting the rebound amid the elevated risk of a military escalation between the United States and Iran. The US military said on Tuesday its fighter jets shot down an Iranian drone headed towards the Abraham Lincoln aircraft carrier, which was sent to the Arabian Sea on President Trump’s orders.
Charu Chanana, chief investment strategist at Saxo, has identified a few product announcements which explain why AI fears are hitting the software sector now.
Anthropic’s new legal productivity tool is designed for in-house legal teams, aiming to automate tasks like contract review, NDA triage, compliance workflows, legal briefings, and templated responses (with human oversight).
Claude Cowork is Anthropic’s more “agent-like” desktop assistant, built to work across files and common workplace tasks — and now extended with specialised plug-ins that can execute workflows in areas like legal, sales, marketing, and analysis.
Google’s Project Genie is an experimental tool that turns a text prompt or image into a short, interactive world you can explore and remix in real time — a vivid example of how generative AI is expanding from text to richer, more complex outputs.
Chanana says this is leading investore to be more selective in their stock picks, as they try to identify where “the real bottlenecks, moats, and profit pools are likely to sit as AI moves from promise to practice”.
Yesterday’s Wall Street selloff has squeezed the software sector’s price-to-earnings ratio (a key measure of stock valuations):
Software's forward 12m P/E has compressed from 33.1x to 23.2x, multiple contraction of 30%. Valuations are now approaching the 2022 and Covid lows... pic.twitter.com/XAaBPxfpdC
— Liz Thomas (@LizThomasStrat) February 3, 2026
FTSE 100 rises over 10,400 points
Britain’s FTSE 100 share index has now climbed over the 10,400 point mark for the first time, as the rotation out of software stocks and into other sectors continues.
The blue-chip shares index has touched 10,419 points, a new intraday high, up 104 points or 1%.
Beazley (+8.4%) are sill the top riser, following Zurich’s improved takeover proposal, followed by services firm DCC (+8.4%), and specialty chemicals group Croda (+4.3%).
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Eurozone inflation rate drops as energy prices fall
Inflation across the eurozone has fallen below the European Central Bank’s 2% target.
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.
Eurostat says:
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).
Euro area #inflation expected to be at 1.7% in January 2026, down from 2.0% in December 2025. Components: services +3.2%, food, alcohol & tobacco +2.7%, other goods +0.4%, energy -4.1% - flash estimate https://t.co/Z9HgSofNdW pic.twitter.com/XeCPEJAFcC
— EU_Eurostat (@EU_Eurostat) February 4, 2026
UK services firms cut jobs in push for automation
Just in: UK service sector companies continued to cut jobs last month, as they turned to ‘automation’ rather than hiring new staff, a survey shows.
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 “solid increase” in new work.
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.
But despite improved business optimism, employment numbers decreased in January, extending a trend that began in October 2024.
Data provider S&P Global says firms are choosing not to replace voluntary leavers, pointing to “anecdotal evidence” that this is due to squeezed margins, fragile market conditions and efforts to boost productivity through automation.
Tim Moore, economics director at S&P Global Market Intelligence, says:
“The 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.
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.
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.”
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Ben Barringer, head of technology research at wealth manager Quilter Cheviot,says investors are ‘shunning’ the software market due to uncertainty over AI’s potential, and the disruption it could cause:
All 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.
We 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.
Software 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.
There 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.
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AI sell-off continues in London
Software and data firms are under more pressure on the London stock market as AI fears ripple across trading floors.
Stocks vulnerable to AI disruption are among the big fallers on the FTSE 100.
Sage, maker of accountancy software, is down 3.8% this morning, followed by the London Stock Exchange Group (-3.7%), which provides financial data.
Relx, which owns legal information service LexisNexis, are down 1.6%.
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This week’s software selloff feels like a ‘fire sale’, says Saxo Markets’ UK investor strategist Neil Wilson.
He says investors are struggling to value such companies, as AI disruption looms:
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 –7.31%, Salesforce –6.84%. This was carnage for these stocks. S&P Global, Intuit, Equifax and Moody’s 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 –25% YTD and is at its lowest level since April...this is all about the growing dispersion in the AI trade. We don’t know who’s going to win or lose, and we don’t 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 ‘we don’t know how to price these stocks’.
This is not happening in isolation – 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 –2.87%, NVDA – 2.84%, AMZN –1.79%, META –2.08%.
Insurance takeover helps FTSE 100 to new record
Zurich’s improved takeover offer for rival insurer Beazley (see earlier post) has driven the London stock exchange to a new record high.
Beazley’s shares are leading the FTSE 100 risers, up 8.6%, helping to push the Footsie over yesterday’s high to a new peak of 10,383 points.
Beazley’s shares have hit a new record of £12.63 each, lifting the company’s valuation to £7.6bn.
That’s still below Zurich’s new ‘agreement in principle’ on a potential cash offer worth 1,310 pence in cash, though, even though Beazley’s board say they’re ‘minded’ to recommend it, should a firm offer be made.
The FTSE 100 will also be benefiting from the rotation out of software stocks and into other sectors.
Oil companies are also ralling, with BP up 2.3% and Shell rising 1.7%, as the oil price rises.
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Novo Nordisk shares tumble after 2026 forecasts shock investors
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.
After Europe’s stock markets closed on Tuesday, Novo produced a stinker of a financial report – predicting its profits and sales could drop as much as 13% this year, the first declines in years.
Novo, maker of Ozempic and Wegovy, blamed the “Most Favoured Nations” agreement in the US which forced drugmakers to cut their prices, alongside increased competition in the weight loss sector and expiring patents.
Novo Nordisk CEO Mike Doustdar has told reporters this morning that the price reductions for its obesity drug Wegovy in the U.S. are “painful” for the company’s financial results.
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.
Derren Nathan, head of equity research at Hargreaves Lansdown, says:
Novo 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’re Europe’s biggest Pharmaceutical company and one of HL’s five shares to watch for 2026, there’s no place to hide. 2025’s 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.
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’ strong gains so far in 2026. Donald Trump’s crusade on drug prices, patent expiration, and competition all had their part to play. It wasn’t 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’s results, due before Wall Street’s open, paint a different picture. The hope will be that unlike his predecessor, he’s getting all his bad news out of the way at the beginning of the year.
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London-listed companies exposed to Anthropic’s new legal plug-in are under a little more pressure at the start of trading.
The London Stock Exchange Group are down another 1.1% (after falling 13% yesterday), while Relx are down 0.5% (after Monday’s 14% drop).
Yesterday’s software sell-off marked “a dramatic acceleration” of the recent trend, says market strategist Jim Reid of Deutsche Bank, adding:
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.
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.
The drawdown in S&P 500 Software stocks is now -25.2% from the high ... that's worse than last year's plunge pic.twitter.com/Th3DR6DVzO
— Kevin Gordon (@KevRGordon) February 3, 2026
Zurich and Beazley reach initial agreement on £8bn deal
In the insurance world, Zurich appears to have won its battle to aquire smaller rival Beazley after increasing its offer price.
The two companies have told the City this morning they’ve reached “agreement in principle” on the key financial terms of a possible recommended cash offer, which values Beazley at £8bn.
At 1,310 pence in cash plus a 25p dividend, that’s almost 60% higher than Beazley’s closing share price on 16 January, the last business day before Zurich’s interest was public.
Zurich had earlier offered 1,280p a share, but has now bumped it up.
Beazley’s board says it would be minded to recommend the new offer to shareholders, should a firm bid be made – once Zurich has completed its due diligence on the bid.
Beazley offers specialist insurance products, across areas including cyber, professional indemnity, property, marine, and reinsurance, and had batted away several previous wooings from Zurich.
Nvidia's Huang dismisses fears AI will replace software tools
Nvidia CEO Jensen Huang has dismissed fears that artificial intelligence will replace software and related tools, calling the idea “illogical”.
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.
Huang said.
There’s 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.
If you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools ... That’s why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit.
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Introduction: Software selloff goes global amid AI fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A selloff in software and data company stocks that began in Europe yesterday has spread to Asia-Pacific markets, via the US, today.
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.
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.
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%.
There’s 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.
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%.
Chinese software companies dropped too, with Kingdee International Software down 12.5%.
In Japan, economics data firm Nomura Research Institute fell 8%.
The selloff has rattled markets that had only just recovered from the slump in gold and silver last week.
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
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.
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 — and at an accelerated pace.
The agenda
9am GMT: Eurozone services PMI report for January
9.30am GMT: UK services PMI report for January
10am GMT: Eurozone inflation report for January
10am GMT: House of Lords inquiry on stablecoins in the UK to hear evidence
1.15pm GMT: ADP US private payroll report for January
3pm GMT: US services PMI report for January
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