FTSE 100 LIVE: London Rises as AI-Fuelled Software Sell-Off Continues

London, UK – The FTSE 100 surged on Wednesday morning, bucking a global trend of anxiety in the technology sector as a fierce sell-off in software stocks, ignited by fears of AI disruption, rippled from Wall Street through Asia. Investors in Europe appeared to pivot, rotating capital out of growth-oriented tech and into more traditional sectors, propelling London’s benchmark index and its continental peers higher.

The market turmoil was triggered by a stark reminder of artificial intelligence's disruptive power. AI startup Anthropic, backed by tech giants Amazon and Google, unveiled a new tool based on its Claude chatbot designed to perform complex legal and research tasks. The announcement sent a shockwave through the software industry, raising existential questions about the business models of companies that provide paid data analytics and decision-making tools.

The AI Disruption Catalyst

The core fear gripping investors is that generative AI can now replicate, and potentially surpass, the services offered by established software-as-a-service (SaaS) companies, but at a fraction of the cost. This threatens a multi-billion dollar industry built on selling access to curated databases and analytical software to professionals in law, finance, and corporate research.

Ipek Ozkardeskaya, senior analyst at Swissquote, captured the market's sentiment: "The relief that came with the easing selloff across the metals space lasted until news broke that Anthropic... had rolled out a new AI tool designed to handle legal and research work traditionally done using paid databases."

She added, "The announcement spooked markets, triggering a sharp selloff in software companies... on fears that AI and new players are coming for their lunch — and at an accelerated pace."

• Global Contagion: The sell-off was not isolated. It began on Wall Street and quickly spread to Asian markets overnight. In Hong Kong, Chinese software firm Kingdee International Software (0268.HK) plummeted over 12%.
• Indian Tech Hit: The rout extended to India’s formidable IT sector, with industry bellwether Tata Consultancy Services (TCS.BO) falling 7% and peer Infosys crashing 7.5%.
• US Market Impact: The trend is now firmly entrenched in the US. The nine worst-performing companies in the S&P 500 year-to-date are all from the software and related services sectors, with each having lost 25% or more of their value.

European Markets Diverge

While tech felt the pain, European equities found favour as investors sought refuge in other industries. This classic sector rotation benefited London’s blue-chip index, which is heavily weighted towards banking, energy, and consumer staples.

• London Leads: The FTSE 100 (^FTSE) was trading 0.6% higher in early Wednesday activity, benefiting directly from the capital flight out of software.
• Continental Gains: The positive sentiment was shared across the continent. Germany's DAX (^GDAXI) climbed 0.3%, while the CAC 40 (^FCHI) in Paris advanced by a robust 0.7%.
• Pan-European View: The broader STOXX Europe 600 index (^STOXX) also edged up 0.1%, reflecting a cautious but constructive mood outside of the tech sphere.

US futures pointed to a potential rebound on Wall Street, with contracts for the S&P 500 (ES=F), Dow Jones (YM=F), and Nasdaq (NQ=F) all in positive territory ahead of the opening bell.

Asian and US Session Recap

Overnight markets presented a complex picture, dominated by the tech sell-off but also influenced by regional economic data.

• Mixed Asia: Japan’s Nikkei 225 (^N225) fell 0.8%, while Hong Kong's Hang Seng (^HSI) remained flat. Mainland China’s Shanghai Composite (000001.SS) bucked the trend, closing 0.9% higher after the RatingDog Services PMI rose to a 3-month high. In South Korea, the Kospi (^KS11) climbed 1.6% to a new record.
• Wall Street Rotation: The previous session on Wall Street clearly illustrated the rotation theme. While the tech-heavy Nasdaq (^IXIC) lost 1.4% and the S&P 500 (^GSPC) slipped 0.8%, underlying sectors showed significant strength. Materials (+2.00%), consumer staples (+1.71%), and energy (+3.29%) all posted strong gains.

Spotlight: Walmart Hits $1 Trillion Valuation

In a landmark achievement for traditional retail, Walmart (WMT) saw its market capitalization surpass $1 trillion (£730bn). The milestone caps a year-long rally that has seen its share price climb nearly 26%, dramatically outpacing the broader market over the past decade.

The retail giant's success is built on a multi-pronged strategy that has allowed it to thrive amid economic uncertainty and intense competition.

• Capturing Cautious Spenders: As inflation persists and the jobs market cools, Walmart has benefited from higher-income shoppers "trading down" to its lower-priced goods.
• Digital Transformation: The company has aggressively expanded its online marketplace to over half a billion items, launched a one-hour delivery service, and created its Walmart+ subscription to compete directly with Amazon Prime.
• New Revenue Streams: Walmart has successfully built a high-margin, $4 billion advertising business, leveraging its vast customer data and online presence.

"Walmart is firing on all cylinders," investor Charles Sizemore told Reuters, highlighting the company’s ability to blend its vast physical footprint with a rapidly growing digital ecosystem.

The Road Ahead

Looking forward, the market's focus will pivot to a slate of crucial economic data that will provide fresh insights into the health of the US and European economies. This data will be critical for shaping central bank policy expectations.

• Key Data Points: Today’s agenda includes the US ISM services index and the ADP private payrolls report for January. In Europe, the flash Consumer Price Index (CPI) for January will offer a timely read on inflation. Final services and composite PMI figures for both regions are also due.
• Central Bank Watch: Speeches from central bankers, including the Fed’s Lisa Cook, will be closely scrutinized for any hints on the future path of interest rates.
• Earnings Season: Corporate earnings remain a key driver, with results from tech titan Alphabet (GOOG) expected today. The report will be closely watched for commentary on AI's impact on its search and cloud businesses.
• Market Implications: The narrative of AI-driven disruption is here to stay, and investors will continue to re-evaluate valuations in the software sector. Meanwhile, upcoming inflation and employment data will determine whether the recent pivot into cyclical and defensive stocks has staying power or if growth-oriented tech can stage a comeback.