Stocks and Bonds Slide as Brent Rallies Past $105: 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 advanced nearly 5% to top $105 a barrel after a report challenged assumptions that President Donald Trump would hold off escalating the conflict with Iran before next month’s elections. Ten-year Treasury yields climbed six basis points to 5.34%. The move was mirrored across Europe, where traditionally safer German debt also came under pressure.
The S&P 500 was poised to retreat from a record high for a second day. Futures fell 0.5%, while Nasdaq 100 contracts dropped 0.7%. Samsung reported a nearly nine-fold rise in profit, only to miss lofty expectations. The stock dropped 2.4% in Seoul, while chipmakers languished in early US trading.
“Each time oil rebounds, that translates into higher bond yields and pressure on equities, even if they are currently quite resilient,” said Alexandre Baradez, chief market analyst at IG in Paris. “Tech and energy are the main drivers of the US market, so any hint of a slowdown is bound to have an impact.”
A 51% sales jump by Taiwan Semiconductor Manufacturing Co. also did little to stir enthusiasm. Strain in the AI funding boom added to the bearish sentiment as a planned Australian listing by data-center firm Firmus Grid Ltd. failed to attract enough demand at the marketed price, according to people familiar.
Markets are heading into the earnings season after stocks largely shrugged off a surge in bond yields to multidecade highs. Corporate profits will now need to justify that resilience as the pacesetters of the AI buildout issue billions of dollars of debt to fund their ambitions.
Adding another layer of uncertainty is the conflict in the Middle East, which shows no sign of ending and is keeping oil prices elevated. High energy costs are reinforcing expectations that central banks will keep raising rates to contain inflation, with a quarter-point Federal Reserve hike fully priced for December.
Fed Governor Christopher Waller said further rate hikes will likely be needed to slow inflation, though officials have some flexibility on timing.
“If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2% goal,” Waller said Thursday in Istanbul. “The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time.”
In Europe, pressure on banks persisted as the turmoil in French debt markets threatened to derail a sector that has been the region’s top performer for more than a year. The Stoxx 600 Banks Index fell as much as 2.2%, putting it on course for its biggest two-day decline since March.
France is gripped by political deadlock that is complicating efforts to rein in budget deficits running far above target. The selloff in sovereign debt has left more than a third of the country’s corporate bonds trading as if they were safer than the government’s, according to data compiled by Bloomberg.
The market will keep pushing French yield premiums higher until that elicits an official 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:
PepsiCo Inc. lowered its profit outlook as the snacks and beverage company said its recovery in North America is taking longer than expected. NatWest Group Plc is pulling back from the US and European government bond markets, according to people with knowledge of the matter. 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. Credit Agricole SA Chief Executive Officer Olivier Gavalda said the firm rejected Banca Monte dei Paschi di Siena SpA’s bid for Banco BPM SpA. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 7:24 a.m. New York time Nasdaq 100 futures fell 0.7% Futures on the Dow Jones Industrial Average fell 1% The Stoxx Europe 600 fell 0.9% The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1177 The British pound fell 0.2% to $1.3192 The Japanese yen fell 0.1% to 158.28 per dollar Cryptocurrencies
Bitcoin fell 1.1% to $82,509.84 Ether fell 1.4% to $2,538.31 Bonds
The yield on 10-year Treasuries advanced six basis points to 5.34% Germany’s 10-year yield advanced five basis points to 3.52% Britain’s 10-year yield advanced seven basis points to 5.51% Commodities
West Texas Intermediate crude rose 4.9% to $92.59 a barrel Spot gold rose 0.3% to $4,121.52 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anand Krishnamoorthy, Michael Msika and Levin Stamm.
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