Shares slip as oil jumps and bond yields stay high
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, US, September 29, 2026. REUTERS/Jeenah Moon
BOSTON/LONDON/SYDNEY, Oct 8 : Global shares slid on Thursday as a mild pullback in sovereign bond yields was countered by a jump in oil prices and indicators of the massive debt that technology companies may need to sustain their dramatic artificial intelligence-fueled growth.
Wall Street's main indexes fell, with the S&P 500 down about 0.5 per cent and the Nasdaq off nearly 1.3 per cent. Chipmakers, which have soared over 80 per cent so far this year, were clear underperformers on the day following a report that OpenAI's annualized revenues were $20 billion less than the company previously signaled.
Euro zone borrowing costs rose on Thursday as the surge in oil prices intensified inflation concerns, though investors took a breather from selling bonds of heavily indebted countries such as France and Italy. The yield on benchmark US 10-year notes, also pulled back from its elevated levels, dipping 5 basis points to 5.227 per cent. Yields started moving lower after a 30-year bond auction met with solid demand, showing investors remain willing to buy long-dated government debt, despite the ongoing market selloff.
"Markets are going to be watchful if that contagion continues," said Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management.
"At this stage, the markets would be most comforted by monetary intervention," he added, referring to the ECB buying bonds to ease the market strains.
The pan-European STOXX 600 fell 0.75 per cent to around its lowest since June, while France's CAC-40 dropped 0.5 per cent, nearing its lows for the year in March.
Overnight in Asia, Japan's Nikkei had shed 1.4 per cent and South Korea's chipmaker-heavy KOSPI slumped 2.6 per cent.
AI DEBT RUSH
In commodity markets, oil prices settled 4 per cent higher, with Brent crude futures at $104.28, on revived concerns about the war in the Middle East and growing supply disruptions due to a hurricane approaching the US Gulf Coast.
The US quarterly earnings season picks up pace next week with big banks, including JPMorgan, set to report results.
Optimism around strong earnings has buoyed US stocks lately despite shaky geopolitical developments and concerns about rising interest rates. The tech and energy sectors are expected to report the biggest quarterly earnings growth, while the broader S&P 500 is expected to post a punchy 30.6 per cent increase in quarterly earnings, according to LSEG data.
Vlad Barbalat, Liberty Mutual Group's chief investment officer and president of global risk & capital solutions, said the S&P 500’s roughly 15 per cent return this year looks ordinary on the surface, but the composition is striking.
"The index has risen even as its forward P/E has fallen from roughly 22x to 19x, supported by exceptionally strong growth in rolling forward earnings, all while more than a third of S&P 500 stocks are down," Barbalat wrote in an email. "The result is a historically uncommon combination: a narrow rally in which the market has gotten cheaper even as the index hovers near all-time highs."
Debt remains a strong underwater current. The Wall Street Journal added to media reports on Wednesday that SpaceX, Broadcom and Oracle were all looking to raise serious money to buy high-end AI chips.
Broadcom was looking for $50 billion in financing, while SpaceX was planning to issue $30 billion in investment-grade debt and raise $10 billion in loans to buy chips from Nvidia, which is a major shareholder in SpaceX. Credit default insurance on SpaceX jumped to record highs, while its shares and bonds lost ground.
SOVEREIGN BONDS VS CORPORATE DEBT
Still, the fact much of this money will be spent on AI equipment is set to be positive for earnings in the semiconductor and memory sectors.
Samsung Electronics on Thursday reported a 783 per cent jump in third-quarter operating profit to 107.4 trillion won ($80.17 billion), though its shares lost 2.4 per cent.
TSMC, the world's largest contract chipmaker, also reported a record third-quarter revenue of T$1.49 trillion ($46.71 billion), up 50 per cent from the year-earlier period. Its shares fell 1.35 per cent.
All this corporate debt is coming at a time when sovereign bond markets are being sorely tested by inflation fears, ever-widening budget deficits and rising cash rates.
Minutes of the Federal Reserve's last meeting released on Wednesday showed "most" members considered another rate hike likely by year-end, though they would approach each meeting with an open mind.
Markets imply just a 17 per cent chance the Fed will move again this month, but are nearly 83 per cent priced for a rise in December.
"We expect a second Fed hike in December, though we see a strong chance the Fed ultimately concludes further tightening is unnecessary," analysts at Goldman Sachs wrote in a note.
Strains in the French bond market led Bank of France head Emmanuel Moulin to say the country's economic situation was serious on Wednesday, but he said it did not need help from the European Central Bank.
Still, the euro gained against the dollar as a rise in euro zone bond yields stalled. The greenback also retreated versus the yen, with the Japanese currency protected by the threat of intervention.
Non-interest-bearing gold has suffered as yields climbed, but it was steady at $4,111 an ounce having found bids at two-month lows. [GOL/]
