US Stocks Waver, Bonds Gain as AI Rebound Falters: Markets Wrap

(Bloomberg) — A rebound in the artificial intelligence trade sputtered after the dismal debut of a South Korean data center firm revived concerns about whether the technology’s spending boom can last.

S&P 500 futures swung between gains and losses as a poor reception for Elice Inc. in Seoul sapped appetite for risky assets. The AI-infrastructure provider plunged 32%, suffering the worst opening day for a sizable company in the country. Nasdaq 100 futures were down 0.4%, halting their day-long recovery.

Treasuries caught a fresh haven bid even as oil prices climbed, with 10-year yields dropping two basis points to 5.12%. Brent crude topped $111 a barrel for the first time since May as traders weighed the risk of further Iranian attacks in the Strait of Hormuz. The dollar fell 0.2%.

Elice’s poor reception echoes the funding concerns brought sharply to the fore by the abandoned IPO of Australia’s Firmus Grid Ltd. barely two weeks ago. Those worries are also evident in debt markets, where spiking yields for the likes of CoreWeave Inc. signal that borrowing will become more expensive.

“Concerns surrounding AI-related data center and infrastructure investment have been building for several days and are now weighing heavily on sentiment,” said Roger Lee at Cavendish. “The market probably needs some reassurance that the huge capex investment is generating a return. That is hard to see at the moment.”

Investors are now waiting for results from the biggest AI spenders for clues on how long the vast outlays can continue and at what pace. SpaceX is expected to report after the close on Tuesday, followed by Meta Platforms Inc. tomorrow.

Meta, Amazon.com Inc., Microsoft Corp. and Alphabet Inc. alone are expected to spend roughly $750 billion this year.

Tuesday’s risk-off mood extended across regions. MSCI Inc.’s benchmark for Asia touched its lowest level since July, with South Korea’s Kospi index falling 3.7%. Europe’s Stoxx 600 dropped 0.6%. Bitcoin resumed losses.

Bonds, meanwhile, received a boost from the strongest demand on record at an auction of 20-year Japanese debt, a signal that elevated yields are luring domestic investors back into the market. While European bonds were modestly higher across the board, French debt remained under presssure.

The extra yield investors demand to hold French 10-year bonds over safer German debt rose two basis points to 150 basis points, a level last seen on Oct. 5.

“We see opportunities where higher sovereign bond yields better compensate investors for risk without signaling weaker fundamentals,” the BlackRock Investment Institute said in a note. Yet, the sharp selloff in French government bonds shows “selectivity is key.”

Corporate Highlights:

Nscale Ltd., the AI cloud computing firm, is in talks to sell computing power to Anthropic PBC in a deal that could be worth about $45 billion, according to people familiar with the negotiations. ABB Ltd. reported third-quarter orders that surpassed expectations after demand for electric components used by data centers and utilities surged. Schneider Electric SE is raising about €6 billion ($6.7 billion) in an offering of new shares to help fund its largest-ever acquisition. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.6% as of 9:50 a.m. London time S&P 500 futures were little changed Nasdaq 100 futures fell 0.4% Futures on the Dow Jones Industrial Average rose 0.4% The MSCI Asia Pacific Index fell 1.3% The MSCI Emerging Markets Index fell 1.3% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1231 The Japanese yen rose 0.2% to 158.14 per dollar The offshore yuan was little changed at 6.6780 per dollar The British pound rose 0.4% to $1.3356 Cryptocurrencies

Bitcoin fell 0.7% to $81,318.24 Ether fell 0.8% to $2,379.17 Bonds

The yield on 10-year Treasuries declined two basis points to 5.12% Germany’s 10-year yield declined two basis points to 3.43% Britain’s 10-year yield was little changed at 5.43% Commodities

Brent crude rose 1.5% to $111.22 a barrel Spot gold fell 0.5% to $4,121.60 an ounce This story was produced with the assistance of Bloomberg Automation.

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