Global equity markets slipped on Thursday, reflecting heightened anxiety in European sovereign bond markets, a surge in oil and gas prices, and reports that several large technology companies are seeking billions of dollars in new debt to fund artificial‑intelligence projects.
European bond market pressure
European investors saw renewed selling of French and other heavily indebted countries’ bonds, driving the region’s share index toward a three‑month low. A trio of European Central Bank policymakers issued fresh warnings about inflation, adding to market unease.
“Markets will be watchful if that contagion continues,” said Kiran Ganesh, a multi‑asset strategist at UBS Global Wealth Management. He added that monetary intervention, such as ECB bond purchases, would be the most comforting step, but warned that fiscal authorities would likely need to act first, recalling the euro‑zone crisis of 2011.
Oil price jump adds to bond jitters
Oil prices rose nearly 4% after a spate of attacks on shipping in the Gulf of Oman, further unsettling bond markets despite a strong auction of U.S. 10‑year Treasury debt that pulled benchmark yields back from 24‑year highs.
The dollar remained firm, while the euro hovered near a 17‑month low as concerns over France’s fiscal health spread to Italian and Greek debt and to parts of the banking sector.
Tech firms seek massive AI financing
In the corporate debt arena, the Wall Street Journal reported that SpaceX, Broadcom and Oracle are pursuing large financing packages to purchase AI chips. Broadcom is targeting $50 billion, while SpaceX plans to issue $30 billion in investment‑grade bonds and raise $10 billion in loans to buy chips from Nvidia, a major shareholder in SpaceX.
Credit default swaps on SpaceX spiked to record levels, and the company’s shares and bonds fell. Nigel Green, CEO of deVere Group, warned of a “dangerous loop” in which Nvidia finances the very customers buying its products, exposing global investors to heightened risk if projected AI profits do not materialize.
“The AI build‑out started on cash. It’s increasingly running on credit, and credit changes the risk profile entirely,” Green said. “Debt has to be repaid on schedule, whether the revenues show up or not.”
Semiconductor earnings remain strong
Despite the debt‑heavy financing, the influx of AI spending could boost earnings for semiconductor and memory manufacturers. Samsung Electronics projected a 783% jump in third‑quarter operating profit to 107.4 trillion won, though its shares fell 2.4%. Taiwan Semiconductor Manufacturing Co. (TSMC) reported record third‑quarter revenue of T$1.49 trillion, up 50% year‑over‑year, even as its shares slipped 1.35%.
U.S. monetary policy outlook
Federal Reserve minutes released Wednesday indicated that most members expect another rate hike by year‑end, though they remain open‑minded at each meeting. Markets assign a 19% chance of a Fed move this month, but price an 80% probability of a December hike.
Analysts at Goldman Sachs anticipate a second Fed increase in December but see a strong chance the central bank will conclude that further tightening is unnecessary. This outlook helped keep two‑year Treasury yields at 4.80%, while ten‑year yields rose to 5.33% in European trading after briefly hitting a 24‑year peak of 5.36%.
Euro and dollar movements
Bank of France Governor Emmanuel Moulin acknowledged France’s serious economic situation but said the country does not need ECB assistance. Investors responded by selling euros, which traded around $1.1185 after a 0.6% decline on Wednesday. A break below $1.1161 could push the euro toward $1.1065.
The dollar benefited from the euro’s weakness, with the Bloomberg Dollar Index climbing to 102.34, near an 18‑month high. The yen held steady at 158.22, supported by the prospect of Japanese intervention.
Precious metals
Gold, which offers no yield, slipped as bond yields rose, but managed a modest 0.6% rebound to $4,136 an ounce after finding support at two‑month lows.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
