European shares fell and US stocks were set for a lower opening yesterday as another rise in crude oil prices kept risk sentiment in check, while investors homed in on results from AI bellwether companies later this week.
The pan-European STOXX 600 slid 0.7 per cent after dropping close to 1pc on Monday, with European semiconductor companies including ASML and ASMI falling almost 3pc.
The euro was trading flat against the dollar at $1.12, while yields on 10-year French government bonds inched higher to 4.955pc after their biggest one-day jump in about a month, as widespread protests underscored the difficulties the French government faces in reducing its large deficit.
French stocks fell almost 1pc, in line with broader market weakness.
Crude prices resumed their climb, with Brent hitting a five-month high above $111 a barrel. Yemen’s Iran-aligned Houthis said on Monday they had attacked Saudi energy, airport and military targets.
The dollar index, which measures the greenback against a basket of currencies, fell 0.1pc to 101.89.
The Japanese yen strengthened 0.2pc after an auction of long-dated Japanese government bonds drew record demand. Media reports said the Bank of Japan may raise its inflation outlook for the next fiscal year in forecasts due this month.
In the US, futures on the tech-heavy Nasdaq slipped 0.7pc, a day after finding some support following last week’s sharp selloff.
The spotlight is on corporate earnings. Investors will be looking for evidence that consumers and the broader economy remain resilient but, chiefly, that the vast amount of capital pouring into the AI buildout is showing signs of paying off.
Oil prices slipped after touching a five-month high as traders weighed a meeting between the Iranian president and Pakistan’s army chief, a key US-Iran mediator, against continued Houthi attacks on Saudi infrastructure and reports of vessel attacks in the Gulf.
Higher oil prices have raised concern about inflation staying higher for longer. The dollar jumped last week after data showed that US consumer price inflation accelerated in September.
But that move was soon overtaken by concerns over AI.
“Energy prices pushing higher is good for the dollar, but if it gets to the point where rates go so high that the AI trade blows up, suddenly it has a negative impact,” said Dominic Bunning, head of G10 FX strategy at Nomura. “There’s a threshold there and we’re playing around with that at the moment.”
Strong capital inflows into AI stocks in the US have supported the dollar. Higher interest rates, driven partly by growth and inflation expectations tied to the sector, have helped.
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