A rise in oil prices prompted a fresh round of selling in bonds and stocks as even a record profit from chipmaking heavyweight Samsung Electronics Co. failed to muster demand for riskier assets.
Brent crude advanced more than 4% to top $104 a barrel after a report challenged assumptions that President Donald Trump would hold off escalating the conflict with Iran before next month’s midterm elections. Ten-year Treasury yields climbed six basis points to 5.34%. The move was mirrored across Europe, where traditionally safer German debt also came under pressure.
The S&P 500 was poised to retreat from a record high for a second day. Futures fell 0.4%, while Nasdaq 100 contracts dropped 0.6%. Samsung reported · a nearly nine-fold rise in profit, only to miss lofty expectations. The stock dropped 2.4% in Seoul, while chipmakers languished in early US trading. A 51% sales jump by Taiwan Semiconductor Manufacturing Co. also did little to stir enthusiasm.
“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.”
Markets are heading into an earnings season after stocks largely shrugged off a surge in bond yields to multidecade highs. Corporate profits will now need to justify that resilience as the pacesetters of the artificial-intelligence buildout issue billions of dollars of debt to fund their ambitions.
Adding another layer of uncertainty is the conflict in the Middle East, which shows no sign of ending and is keeping oil prices elevated. High energy costs are reinforcing expectations that central banks will keep raising rates to contain inflation, with a quarter-point Federal Reserve hike fully priced for December.
Fed Governor Christopher Waller said further rate hikes will likely be needed to slow inflation, 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.”
In Europe, pressure on banks persisted as the turmoil in French debt markets threatened to derail a sector that has been the region’s top performer for more than a year. The Stoxx 600 Banks Index fell as much as 2.2%, putting it on course for its biggest two-day decline since March.
France is gripped by political deadlock that is complicating efforts to rein in budget deficits 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 official response strong enough to turn the tide, 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.
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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.
- SK Hynix Inc. ’s Solidigm has picked lead banks for its US initial public offering next year, according to people familiar with the matter.
- Tesco Plc · narrowed its profit outlook range as better sales online helped Britain’s largest grocer shrug off mounting cost pressure in the first half.
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Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.8% as of 10:10 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.7%
- The MSCI Asia Pacific Index fell 1.7%
- The MSCI Emerging Markets Index fell 1.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1186
- The Japanese yen was little changed at 158.22 per dollar
- The offshore yuan was little changed at 6.7029 per dollar
- The British pound fell 0.2% to $1.3192
Cryptocurrencies
- Bitcoin fell 0.5% to $82,962.28
- Ether fell 0.4% to $2,563.34
Bonds
- The yield on 10-year Treasuries advanced four basis points to 5.33%
- Germany’s 10-year yield advanced three basis points to 3.51%
- Britain’s 10-year yield advanced three basis points to 5.47%
Commodities
- Brent crude rose 3.9% to $104.12 a barrel
- Spot gold rose 0.4% to $4,127.11 an ounce
This story was produced with the assistance of Bloomberg Automation.