Oil Rise Spurs Fresh Selling in Stocks and Bonds: Markets Wrap

(Bloomberg) — 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 rose more than 3% to top $103 a barrel on a report challenging widespread assumptions that President Donald Trump would hold off on escalating the conflict with Iran before the midterm elections. Bond yields climbed, with the 10-year Treasury yield up four basis points to 5.32%. The premium on 10-year French yields over their German counterparts rose to 140 basis points.

The S&P 500 was poised for a second day of losses after hitting a record high earlier this week. Futures for the index fell 0.3%, while those for the Nasdaq 100 dropped 0.5%. Samsung reported a nearly nine-fold rise in quarterly profit, though that still fell short of lofty expectations. The stock fell 2.4% in Seoul.

The upcoming earnings season will offer the AI trade one of its sternest tests yet at a time when yields are at multidecade highs and companies driving the global buildout are issuing billions of dollars in debt. In the latest example, Tencent Holdings Ltd. is said to be considering issuing $5 billion of debt to finance its AI needs.

“It’s clear that higher yields have not slowed the AI spending spree, but they make the eventual payoff increasingly important,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “Earnings will remain key in determining whether the tech rally has more room to run.”

Higher oil prices are complicating the outlook by adding to inflation pressures after the Federal Reserve raised interest rates last month. Money markets see about a 20% chance of another hike this month and fully price one by December.

“Another rate hike is probably coming this year because current policy isn’t very restrictive,” said David Russell at TradeStation. “With inflation above target and most measures of economic activity strong, price stability is the Fed’s dominant mandate.”

A gauge of the dollar held its gains from Wednesday’s session. The euro steadied as traders monitored France’s fiscal strains. The market will keep pushing French spreads wider until it prompts a 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.

Corporate News:

Samsung Electronics Co. reported a nearly nine-fold rise in quarterly operating profit, though that was still shy of sky-high expectations elevated by relentless spending on AI infrastructure. Taiwan Semiconductor Manufacturing Co. reported a 51% rise in quarterly revenue, a positive signal for investors trying to gauge the sustainability of a global AI infrastructure buildout. 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. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 1% as of 8:28 a.m. London time S&P 500 futures fell 0.3% Nasdaq 100 futures fell 0.5% Futures on the Dow Jones Industrial Average fell 0.7% The MSCI Asia Pacific Index fell 1.6% The MSCI Emerging Markets Index fell 1.5% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1194 The Japanese yen was little changed at 158.18 per dollar The offshore yuan was unchanged at 6.7026 per dollar The British pound was little changed at $1.3202 Cryptocurrencies

Bitcoin fell 0.4% to $83,058.56 Ether fell 0.1% to $2,570.27 Bonds

The yield on 10-year Treasuries advanced four basis points to 5.32% Germany’s 10-year yield advanced three basis points to 3.50% Britain’s 10-year yield advanced four basis points to 5.48% Commodities

Brent crude rose 3.6% to $103.85 a barrel Spot gold rose 0.3% to $4,125.31 an ounce This story was produced with the assistance of Bloomberg Automation.

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