Global markets presented a mixed outlook as U.S. stock futures saw slight gains following a significant tech sector rebound on Monday, driven by a recovery in names like Nvidia and Tesla after a recent AI-driven sell-off.
While Wall Street looked to move past AI credit concerns, Asian chip stocks slid amid lingering worries, and European markets, particularly France, faced headwinds from political turmoil and economic data. Oil prices edged higher on Middle East tensions, and India’s Jio Platforms saw massive interest for its IPO, highlighting diverse regional market dynamics.
U.S. stock futures presented a mixed picture early Tuesday, following a session where technology shares saw a much-needed rebound after a challenging previous week. Investors cautiously re-entered the tech sector, which had experienced a significant sell-off.
As of early trading, S&P 500 futures remained flat, while Nasdaq-100 futures dipped slightly by 0.2%. In contrast, Dow Jones Industrial Average futures showed strength, climbing 94 points, or 0.18%.
Monday's trading session on Wall Street saw the S&P 500 advance 0.4%, and the tech-heavy Nasdaq Composite surged over 1%, spearheaded by major technology players. Notable gains included Nvidia, which added 1.4%, Tesla jumping 3.8%, and Alphabet shares rising approximately 1%.
The tech sector had faced a rout last week, driven by growing apprehensions regarding the substantial debt taken on by companies for their ambitious artificial intelligence (AI) infrastructure build-outs. Jose Torres, senior economist at Interactive Brokers, commented on the improving market sentiment: "Improving moods regarding the prospects of modern technology have Wall Street breathing a sigh of relief as participants drop hedges, after the cost of volatility protection soared intraday on Friday, ahead of the intensifying selloff."
Amid this climate, CoreWeave, a "neocloud" company that saw its stock plummet by over 25% last week, attempted a recovery following a "buy" upgrade from Goldman Sachs. However, early gains proved fleeting, and the stock ultimately closed marginally lower. Credit market concerns continued to shadow AI-related companies, with Oracle debt yields remaining elevated and CoreWeave's bond yields high, alongside distressed levels for its five-year credit default swaps.
The week ahead is bustling with corporate developments. United Airlines is slated to release its earnings report after the closing bell, while General Motors will report its results before market open. Roughly 70 S&P 500 companies are scheduled to announce earnings, alongside the release of key economic data, including housing starts and pending home sales figures on Tuesday.
Global Economic Snapshots
UK Wages Surpass Expectations Ahead of Bank of England Decision
Official data released Tuesday revealed that U.K. wages, excluding bonuses, grew by 3.7% year-on-year in the three months leading up to August. This figure narrowly exceeded the 3.6% forecast by economists polled by Reuters, setting the stage for an anticipated interest rate hike from the Bank of England next month. The central bank is expected to increase its base rate by 25 basis points to 4%, driven by concerns that the ongoing Iran war's energy price shock is fueling broader inflationary pressures, including wage growth. Bank of England Governor Andrew Bailey noted last week that the longer the conflict persists, the more difficult it will be for the BoE to refrain from action, though he also described current inflation pressures as "quite subdued."
French Stocks Brace for Further Declines Amid Political Turmoil
France's CAC 40 index is projected to open lower on Tuesday, according to IG futures data, following a 1.1% dip on Monday. The country's stock market has notably underperformed its European counterparts this year, grappling with political instability and social unrest stemming from cost-of-living issues and widespread protests. Analysts attribute this underperformance to rising government bond yields, France's widening spread over Germany, and a slump in luxury spending. Other major European indices, including the U.K.'s FTSE 100, Germany's DAX, and Italy's MIB, are also anticipated to begin the trading day in negative territory. An interactive chart illustrates the recent performance of the France CAC 40 index.
An interactive chart by CNBC showed France's CAC 40 index performance.
Oil Prices Edge Up on Renewed Middle East Tensions
Oil prices saw a slight increase on Tuesday, fueled by escalating attacks from Iran-backed Houthis against Saudi Arabia. These actions have intensified concerns about potential supply disruptions across the Middle East. Brent crude futures rose 0.14% to $109.70 per barrel, while U.S. West Texas Intermediate (WTI) crude futures for November delivery gained 0.25% to reach $103.92 per barrel. The Houthis claimed responsibility for new attacks on King Khalid International Airport, Abha International Airport, Saudi Aramco facilities in Yanbu, the Shaybah oilfield, and Saudi naval forces. However, the prospect of increased Russian oil supplies entering the market, following U.S. President Donald Trump's waiver of several Russia-related sanctions to allow countries like India to purchase energy from Moscow, helped cap the price gains.
Jio Platforms IPO Sees Anchor Bids Exceed $26 Billion
India's telecommunications giant, Jio Platforms, is poised for a monumental initial public offering (IPO), with its anchor investor quota oversubscribed by more than 30 times. The offering attracted substantial bids from leading asset managers, including BlackRock, Capital Group, and GIC. Backed by tech titans Meta and Google, Jio Platforms aims to raise up to 302 billion rupees ($3.2 billion), potentially making it India's largest IPO in rupee terms. Sources indicate that the company's anchor book garnered total bids worth 2.5 trillion rupees ($26.3 billion) for the 81.1 billion rupee anchor portion. Jio Platforms confirmed on Monday the final allocation of 72.47 million equity shares to anchor investors at 1,119 rupees per share, hitting the upper range of its price band. The anchor book facilitates early investment from large institutional investors before the public bidding phase.
Indonesia's Jakarta Composite Rebounds as Reforms Loom
Indonesia's benchmark Jakarta Composite Index experienced a significant 3% rebound on Tuesday. This surge follows the country's stock exchange announcing plans to delist companies with highly concentrated ownership from the index. This strategic move aims to address concerns voiced by global index provider MSCI and comes after the index recently plunged to a six-year low. Indonesia is actively working to prevent a potential downgrade by MSCI to "standalone market" status, a classification reserved for markets that do not meet the accessibility, size, or liquidity criteria of its broader indexes.
Asian Chip Stocks Slide Amid Lingering AI Spending Worries
Despite an overnight rebound in U.S. technology shares, Asian chip stocks faced declines on Tuesday, as persistent concerns over the sustainability of artificial intelligence (AI) spending continued to weigh heavily on investor sentiment. South Korean memory chipmaker SK Hynix saw a 4.07% drop, while Samsung Electronics fell 1.03%. In Japan, tech investor SoftBank Group tumbled 4.46%, with chip equipment manufacturer Tokyo Electron shedding 1.45%, and Renesas Electronics losing 1.49%. This contrasts with Monday's performance in the U.S., where the tech-heavy Nasdaq Composite climbed over 1%, and major chip players like Nvidia, Intel, Advanced Micro Devices (AMD), and Micron recorded gains of 1.4%, 2%, 1.8%, and approximately 3% respectively.
Asia-Pacific Markets Open Lower Across the Board
Markets across the Asia-Pacific region opened in negative territory on Tuesday. Japan's Nikkei 225 declined 0.85%, and the Topix slid 0.56%. South Korea's Kospi lost 2.20%, with its small-cap counterpart, Kosdaq, down 1.03%. Australia's S&P/ASX 200 traded 0.84% lower in early hours.
Subdued Start Expected for Asia-Pacific Markets
Asia-Pacific markets were poised for a subdued opening on Tuesday, diverging from Wall Street's upward trajectory driven by a rebound in U.S. technology stocks following last week's sharp sell-off. Japan's Nikkei 225 was set to decline at open, with its Chicago futures contract trading at 64,910 against the index's previous close of 64,916.7. Futures for Hong Kong's Hang Seng index stood at 24,112, lower than its last close of 24,186.83. Australia's S&P/ASX 200 showed a 0.9% decrease in early trade.
AI Stocks Rally, But Credit Market Remains Skeptical
While AI stocks staged a rally on Monday, the credit market showed continued apprehension. CoreWeave, a key player in the "neocloud" space that led last week's sell-off, saw its stock fluctuate, briefly hitting a 52-week low before closing fractionally lower. Crucially, yields on Oracle debt remained elevated, and CoreWeave's bond yields stayed high, with its five-year credit default swaps indicating distressed levels, highlighting persistent credit worries within the AI trade. The tech-heavy Nasdaq Composite recorded a 1% gain for the day.
U.S. Stock Futures Start the Day Higher
U.S. stock futures opened higher, indicating a positive start to the trading day. Dow Jones Industrial Average futures gained 56 points, or 0.1%, S&P 500 futures climbed 0.1%, and Nasdaq-100 futures advanced 0.2%.
