A rise in oil prices prompted a fresh round of selling in bonds and stocks, with technology shares sliding after Samsung Electronics Co. missed lofty earnings expectations.
Brent crude advanced nearly 5% to toward $105 a barrel after a report challenged assumptions that President Donald Trump wouldn’t escalate the conflict with Iran before the midterm elections. Ten-year Treasury yields were up four basis points to 5.32%. The move was mirrored across Europe, where even traditionally safer German debt came under pressure.
The S&P 500 was set to retreat from a record high for a second day. Futures fell 0.4%, while Nasdaq 100 contracts dropped 0.7%. Samsung reported · a nearly nine-fold rise in profit, but reaction was tempered by worries about the staying power of a debt-fueled boom. The stock slid 2.4% in Seoul, while chipmakers languished in early US trading.
“Each time oil rebounds, that translates into higher bond yields and pressure on equities, even if they are currently quite resilient,” said Alexandre Baradez, chief market analyst at IG in Paris. “Tech and energy are the main drivers of the US market, so any hint of a slowdown is bound to have an impact.”
A 51% jump in sales by Taiwan Semiconductor Manufacturing Co. also did little to stir enthusiasm. Strain in the AI funding boom added to the bearish sentiment as a planned Australian listing · by data-center firm Firmus Grid Ltd. failed to attract enough demand at the marketed price, according to people familiar.
Markets are heading into the earnings season after stocks largely shrugged off a selloff in bonds that pushed yields to multidecade highs. Corporate profits will now need to justify that resilience as the pacesetters of the AI buildout issue billions of dollars of debt to fund their ambitions.
The ongoing conflict in the Middle East adds to the uncertainty and keeps oil prices elevated. The cost of energy reinforces expectations that central banks will raise rates to contain inflation, with a quarter-point Federal Reserve hike fully priced for December.
Fed Governor Christopher Waller said further rate hikes are likely needed, though officials have some flexibility on timing.
“If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2% goal,” Waller said Thursday in Istanbul. “The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time.”
Initial jobless claims for the week through Oct. 3 also pointed to continued labor-market · strength, falling to their lowest level since July.
Pressure on banks persisted in Europe as the turmoil in French debt markets threatened to derail a sector that has been a top regional performer. The Stoxx 600 Banks Index fell as much as 2.6%.
France’s political deadlock is complicating efforts to rein in a budget deficit running far above target. The selloff in sovereign debt has left more than a third of the country’s corporate bonds trading as if they were safer than the government’s, according to data compiled by Bloomberg.
The market will keep pushing French yield premiums higher until that elicits an appropriate official response, said Sean Keane, chief strategist for Asia Pacific at JB Drax Honore.
“France is now on everyone’s screen and Europe is widely viewed as having a set of intractable problems that it doesn’t have the institutional will or collective capability to address,” Keane said.
What Bloomberg Strategists Say:
“Another morning sees another spike in oil prices on another flare-up in Middle East tensions, producing another rise in bond yields and another dip in stock prices. While the latter has been fairly substantial in Asia, Europe, and US futures, in general it has been the case that fixed income has borne much more of the brunt of oil moves than equities in the United States.”
— Cameron Crise, Macro Strategist, Markets Live. Click here for the analysis.
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Corporate News:
- PepsiCo Inc. · lowered its profit outlook as the snacks and beverage company said its recovery in North America is taking longer than expected.
- NatWest Group Plc · is pulling back from the US and European government bond markets, according to people with knowledge of the matter.
- Broadcom Inc. , fresh off the launch of a $60 billion debt financing to help fund Anthropic PBC’s artificial intelligence build-out, is already sketching out plans for its next blockbuster deal.
- Credit Agricole SA · Chief Executive Officer Olivier Gavalda said the firm rejected Banca Monte dei Paschi di Siena SpA’s bid for Banco BPM SpA.
- Devon Energy Corp. · agreed to sell its drilling portfolio in the Eagle Ford shale basin of South Texas to Crescent Energy Co., an oil producer backed by KKR & Co., for about $4.2 billion.
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Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.4% as of 8:36 a.m. New York time
- Nasdaq 100 futures fell 0.7%
- Futures on the Dow Jones Industrial Average fell 0.7%
- The Stoxx Europe 600 fell 0.5%
- The MSCI World Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1190
- The British pound was little changed at $1.3206
- The Japanese yen was little changed at 158.21 per dollar
Cryptocurrencies
- Bitcoin fell 1.3% to $82,278.12
- Ether fell 1.7% to $2,529.5
Bonds
- The yield on 10-year Treasuries advanced four basis points to 5.33%
- Germany’s 10-year yield advanced four basis points to 3.51%
- Britain’s 10-year yield advanced four basis points to 5.48%
Commodities
- West Texas Intermediate crude rose 4.8% to $92.49 a barrel
- Spot gold rose 0.3% to $4,121.87 an ounce
This story was produced with the assistance of Bloomberg Automation.