Shares slip as oil spikes and bond bashing rumbles on
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, US, September 29, 2026. REUTERS/Jeenah Moon
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BOSTON/LONDON/SYDNEY, Oct 8 : Global shares slid on Thursday as strains in sovereign bond markets were aggravated by a jump in oil prices and reports that some major tech firms were seeking to raise billions in debt in direct competition for limited funding.
Wall Street got off to a bumpy start, with the S&P 500 down about 0.4 per cent and the Nasdaq off nearly 0.6 per cent, as the US 10-year rate nudged higher again and as Europe’s traders sent their region’s stocks to a near three-month low amid extensive handwringing over France and other heavily indebted countries’ finances. [GVD/EUR]
A whole flock of European Central Bank policymakers also issued fresh inflation warnings to feed the debate on its next move, while oil prices reared up more than 5 per cent too following an increase in attacks on shipping in the Gulf.
While lofty US Treasury yields underpinned the dollar, the euro struggled near a 17-month low as the concerns over “le spread” in France continued to affect Italian and Greek debt, as well as parts of the banking sector.
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CLIMB IN BORROWING COSTS
“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 steady climb in borrowing costs left the benchmark US Treasury yield just off its recent 24-year peak and put equities on the defensive.
The pan-European STOXX 600 fell 0.7 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, Brent futures rose back above $105 a barrel in their biggest jump in a month, while US crude futures added 5.18 per cent to $92.85 a barrel.
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 21 per cent chance the Fed will move again this month, but are nearly 80 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.
The prospect of a pause in tightening helped keep 2-year Treasury yields around 4.8 per cent, while 10-year yields crept up to 5.29 per cent, having hit a 24-year top of 5.36 per cent overnight.
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.
Investors reacted by offloading the euro, which was pinned at $1.119 after having lost 0.6 per cent on Wednesday.
The dollar was the main beneficiary of the single currency’s woes and its index held steady around 102.32, near an 18-month peak. It was steady, too, on the yen at 158.35, 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/]
Source: Reuters
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