Stock Losses Build as AI Rally Cools, Oil Jumps: Markets Wrap
(Bloomberg) — Stocks and bonds dropped as investors faced a trio of headwinds with a pullback in the artificial-intelligence trade, mounting bets on a US interest rate hike and rising oil prices due to a worsening of the Middle East conflict.
Asian shares fell 3.6%, paced by an 8.2% slump in South Korea’s Kospi, the world’s best-performing major benchmark this year on the AI trade. Futures indicated a 1.6% decline in European equities and further losses on Wall Street after the Nasdaq 100 posted its biggest drop since April 2025 on Friday.
Brent crude climbed 4.8% to above $97.50 a barrel after Israel said it struck several military targets in Iran, retaliating against missile attacks by Tehran. Higher oil prices will add further pressure to inflation, and that coupled with strong US jobs data, helped boost bets for higher Federal Reserve interest rates.
The simultaneous retreat in stocks and bonds marks the biggest test in months for a bull market that has been fueled by easing geopolitical risks and the AI boom. Investors are now contending with a plethora of negatives: doubts whether the rally has run too far and too fast, renewed fighting in the Middle East, higher oil prices and inflation pressures prompting central banks to raise rates.
“It’s almost as if traders suddenly woke up to a different reality this week, one where strong US jobs data, rising rate-hike fears, and lingering geopolitical risks are taking center stage over the AI euphoria,” said Tim Waterer, chief market analyst at KCM Trade.
On Friday, Wall Street’s historic weekly run came to a halt as the selloff in tech stocks gathered momentum. The Nasdaq 100 Index sank 4.8%, while growing anxiety about valuations sent the S&P 500 down 2.6%. A gauge of chip stocks slumped 10%.
Chipmakers were weak across Asia as well. Samsung Electronics Co. tumbled as much as 11%, SK Hynix Inc. lost 10% and Taiwan Semiconductor Manufacturing Co. slid 5.7%.
What Bloomberg Strategists Say…
“It’s set to be a tough week for financial assets globally as US CPI on Wednesday is likely to cement expectations for a Fed rate hike this year. Equities face pressure from higher yields and evaporated risk premiums, especially as investors are overextended after chasing the AI momentum rally.”
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
“In the longer run, this will prove to be a technical correction, albeit a scary one in a longer-term bull market,” Goldman Sachs Group Inc. Chief Asia Pacific regional equity strategist Tim Moe said on Bloomberg TV.
A flood of new shares from companies looking to fund their AI ambitions is also raising questions on Wall Street about whether there will be enough buyers to soak them all up.
Elsewhere, Treasuries extended declines on Fed rate-hike bets and concerns about inflation from higher oil prices. The Treasury 10-year yield climbed four basis points to 4.57%. Bonds in Japan and Indonesia also declined. Non interest-bearing gold dropped 1% to about $4,285 an ounce.
Meanwhile, Bitcoin climbed 1.5% to about $63,000 after falling below the $60,000-mark on Friday for the first time since Donald Trump won reelection in 2024. The cryptocurrency has lost about half its value since reaching a peak above $126,000 in October last year.
In geopolitical news, Israel said it struck several military targets in Iran, retaliating against missile attacks by Tehran despite Trump’s call for Prime Minister Benjamin Netanyahu to refrain from hitting back.
The exchange is one of the most serious tests of a ceasefire that took effect on April 8 to halt fighting involving the US, Israel and Iran. It comes as the US and Iran appear to be making little progress toward an interim agreement to end the war, even as Trump has repeatedly said a deal is near.
Another factor for investors to consider was the solid US jobs report. The data topped forecasts in May and the unemployment rate held steady at 4.3%.
Interest-rate swaps indicated traders expect a quarter-point Fed hike by the December policy meeting, with a roughly 60% chance of a move in October. Higher US interest rates tend to drain capital from emerging markets, strengthen the dollar and raise borrowing costs, creating a tougher backdrop for equities.
Attention now turns to Fed policymakers’ next meet June 16-17 under the leadership of new Chairman Kevin Warsh.
“The massive US payrolls surprise has landed like a cold shower on a market priced for perfection,” said Hebe Chen, an analyst at Vantage Global Prime. That’s “forcing investors to confront stretched valuations, crowded positioning and the renewed threat of higher-for-longer rates.”
Corporate Highlights:
Intesa Sanpaolo SpA offered to buy Banca Monte dei Paschi di Siena Spa for €30.6 billion ($35.3 billion), a bid that is likely to spur a new phase of dealmaking in Italian finance. A consortium of French telecommunications companies have agreed to buy billionaire Patrick Drahi’s SFR in a deal that values the country’s second-largest mobile carrier at €20.4 billion ($23.5 billion) including debt. Airbus SE has been notifying some customers of delays on A320neo series jets that are due to be delivered in 2027 and 2028, according to people familiar with the matter. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 6:50 a.m. London time Nasdaq 100 futures fell 0.2% The MSCI Asia Pacific Index fell 3.6% The MSCI Emerging Markets Index fell 3.6% Japan’s Topix fell 3.2% Hong Kong’s Hang Seng fell 1.8% The Shanghai Composite fell 2.2% Euro Stoxx 50 futures fell 1.6% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1527 The Japanese yen was little changed at 160.31 per dollar The offshore yuan was little changed at 6.7878 per dollar The British pound was little changed at $1.3335 Cryptocurrencies
Bitcoin rose 1.1% to $62,507.39 Ether rose 1.2% to $1,647.61 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.57% Japan’s 10-year yield advanced 4.5 basis points to 2.710% Commodities
Spot gold fell 1% to $4,286.83 an ounce West Texas Intermediate crude rose 4.6% to $94.72 a barrel This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi and Alice French.
©2026 Bloomberg L.P.
