AI Trade Falters in Runup to Earnings, Oil Drops: Markets Wrap
(Bloomberg) — The artificial intelligence trade took another hit as investors braced for more earnings from megacap tech companies that will offer clues on whether the recent pullback in technology shares has further to run. Oil declined and Treasuries rose.
The Kospi Index in South Korea — a bellwether for the AI trade — fell 1% with Samsung Electronics Co. retreating. Goldman Sachs Group Inc. strategists slashed their target for the benchmark by 25% as concerns over the artificial intelligence trade intensified. Chinese AI model developers slumped, while chip-related stocks were the biggest losers in Japan’s Nikkei.
Sentiment toward tech remained weak as futures for the Nasdaq 100 Index slipped 0.1%. The broader MSCI Asia Pacific Index fell 0.1% as regional equities struggled to recover from four consecutive weeks of losses — the longest losing run since April.
Elsewhere, a Tokyo-based exchange-traded fund tracking Brazilian stocks slumped as much as 16% after Luiz Inácio Lula da Silva pulled off a surprising win in Sunday’s runoff.
Providing some support, global oil benchmark Brent dropped 2% from a six-month high to about $114.35 a barrel. US President Donald Trump said it’s “getting to be decision time” on whether to reach a deal with Tehran or resume attacks as threats from Iran and the Houthis against Americans in the Middle East mount.
Spending on the AI buildout will come under scrutiny as investors assess earnings from Microsoft Corp., Alphabet Inc. and Amazon.com Inc. following a volatile stretch for technology shares. The Federal Reserve and Bank of Japan will also deliver policy decisions as officials grapple with stubborn inflation, higher energy costs and elevated global bond yields.
“Global markets are preparing for another big week,” Nick Twidale, chief market analyst at AT Global Markets in Sydney, wrote in a note. The focus is “set to shift back towards central banks and interest rates after several weeks of geopolitical headlines dominating market moves.”
The Fed and its peers in the euro zone and Japan will probably keep rates steady in the coming week, opting to bide their time before potential further hikes. Three days of decisions starting on Wednesday in Washington are likely to affirm a hawkish stance balanced by a measured pace as policymakers confront inflation risks ranging from surging energy prices to the AI boom.
Elsewhere, French bond futures jumped, outperforming bund futures, after the nation avoided a downgrade at Moody’s Ratings and a repeat of large-scale violence and looting. The euro was also quoted a touch higher.
A Bloomberg gauge of the dollar lost 0.1%.
Treasuries rose across the curve, with the yield on the benchmark 10-year falling three basis points to 4.96%.
“AI doubts, slowdown risks, political uncertainties — in Europe and the US mid-terms — will mean that demand for safety would remain high for awhile,” said Eugene Leow, senior rates strategist at DBS Bank Ltd. in Singapore. “At these absolute yield levels, US Treasuries should function as a risk-off hedge.”
In Brazil, markets are bracing for steep losses after Lula’s stunning comeback to defeat Flávio Bolsonaro, the right-wing candidate that many investors preferred. Bolsonaro called for the annulment of the presidential runoff result.
A currency derivatives contract on the CME exchange showed the real at 5.55 per dollar. While not a direct indication of pricing, the move implies a more than 10% plunge in the real from the close on Friday.
“Markets weren’t positioned for this,” said Anna Wu, an investment strategist and founder of Floodlines Research. “It’s more than a knee-jerk in my view as the local market now faces real risk of government debt and currency weakness.”
It’s also Asia’s busiest earnings week. About 550 of the roughly 1,200 companies in the MSCI Asia Pacific Index are due to report this week, according to data compiled by Bloomberg.
Geopolitical risks are also likely to remain elevated heading into next month. Trump has suggested US strikes on Iran could resume after the Nov. 3 midterm elections, while officials have warned the period between the vote and the new Congress taking office could be particularly dangerous.
“Several factors collide in the week ahead that could determine how the markets fare for the rest of 2026,” wrote Kyle Rodda, a senior analyst at Capital.com.
Corporate Highlights:
Elon Musk said SpaceX has closed a $40 billion debt deal to pay for the chips it needs to fuel its artificial intelligence ambitions. However, people familiar with the matter said the parties were still engaged in pricing discussions as of Sunday and the deal had not yet closed. Volkswagen AG plans to build a new $4 billion factory for its premium Audi brand in the southern US state of Georgia. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 12:52 p.m. Tokyo time Nikkei 225 futures (OSE) fell 0.6% Japan’s Topix rose 0.3% Australia’s S&P/ASX 200 rose 0.1% Hong Kong’s Hang Seng rose 0.5% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures rose 0.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro rose 0.2% to $1.1222 The Japanese yen was little changed at 156.85 per dollar The offshore yuan was little changed at 6.6692 per dollar Cryptocurrencies
Bitcoin fell 1.3% to $79,332.71 Ether fell 2.1% to $2,295.51 Bonds
The yield on 10-year Treasuries declined three basis points to 4.96% Japan’s 10-year yield was unchanged at 2.800% Australia’s 10-year yield was little changed at 5.16% Commodities
West Texas Intermediate crude fell 2.1% to $101.09 a barrel Spot gold rose 0.4% to $4,010.92 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi, Masaki Kondo and Ruth Carson.
©2026 Bloomberg L.P.
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