The main U.S. equity indexes swung back and forth intraday on Monday but ended almost 1% in the red, and futures remained lower ahead of Tuesday's bell. The VIX "fear index" of S&P500 implied volatility hit its highest since mid-October at more than 23, and tech-heavy stock markets around the world fell sharply on Tuesday - with 3% losses in Tokyo and Seoul.

Wariness of earnings day swings in the world's most valuable stock Nvidia was part of the anxiety, with the $5 trillion market cap chip giant due to report on Wednesday. Its stock fell 2% on Monday, with filings showing tech billionaire Peter Thiel's hedge fund sold its entire stake in Nvidia during the third quarter.

But doubts about creeping leverage in the sector amid the AI investment frenzy were also stoked by Amazon's $15 billion debt offering, its first in three years. 

And that spoke to growing demand to hedge AI-related equity exposure via credit default swaps on some of the leading tech companies in the sector. 

Private credit nerves were also jangled as alternative asset manager Blue Owl tumbled 3% premarket after it moved to block redemptions from one of its private credit funds ahead of a merger. Blue Owl is involved with Meta in the financing of a huge Louisiana data center.

The tech sector jitters are also seeping into crypto markets, with the world's biggest digital token bitcoin extending its recent sharp shakeout on Tuesday. Bitcoin plunged below $90,000 for the first time since April 22, almost 30% below its record peak it hit early last month.

Alphabet was one of the few big names to escape Monday's latest downdraft, which included 7-8% stock price hits for Dell and Hewlett Packard, and the Google parent gained 3% on news of a $4 billion Berkshire Hathaway stake in the search giant.

But, adding to the wary mood, Alphabet Chief Executive Sundar Pichai told the BBC on Tuesday that no company would be unscathed if the AI boom collapses, acknowledging "elements of irrationality" in the "extraordinary" tech breakthrough. "I think no company is going to be immune, including us."

The European Commission, meantime, said it had launched market investigations into cloud computing services by Amazon and Microsoft under the Digital Markets Act, which aims to curb the power of Big Tech and ensure a level playing field for smaller rivals.

The other big earnings updates of the week come from the big U.S. retailers, with Home Depot due to report on Tuesday and Walmart later in the week.

Macro markets were more subdued on Tuesday, with hopes of another Federal Reserve interest rate cut this year knocked back considerably over the past week by hawkish Fed comments on needing to keep above-target inflation in check. 

Treasury yields did dial back, however, amid the fresh burst of equity volatility.

With a backlog of government economic releases focused on Thursday's September payrolls report, more up-to-date soundings on the economy underlined the more cautious Fed policy stance. The New York Fed's latest business survey showed business conditions well above forecast for November.

Britain's gilts remain a good bet for many investors, but political anxiety and a potential volatility premium have started to scatter a recently crowded trade. 

Buying UK government bonds became one of the most popular moves of the late summer as Britain's relatively tight fiscal and monetary policy stood out from its G4 peers. 

The government's long-awaited annual budget looks primed for another turn of the screw this month - in stark contrast to the loosening in Washington, Tokyo and Berlin.  

Many asset managers have thus likely calculated that UK growth, inflation and interest rates are all headed lower in a "win-win" for bond investors.

Yet, skewed positioning is always a risk, especially in a market that has become a magnet for short-term hedge funds and momentum jockeys. And this risk is being amplified by government skittishness and public relations flubs.

That's what we got last week in a seemingly endless string of stories about possible government leadership changes and a slightly bizarre flip-flop on whether higher income taxes would feature in the budget. And it was enough to scatter the herd.  

Graphics are produced by Reuters.