Trading day: AI storm abates
Wall Street recovered some ground on Monday as investors bought back beaten-down tech stocks and looked forward to key earnings reports, while easing worries over AI also cooled last week’s safe-haven demand for bonds and pushed yields higher. Unrest and riots in France, meanwhile, weighed heavily on French bond prices and pushed the euro lower.
Today we look at AI’s pivotal role in exacerbating global imbalances and driving global capital flows. The two are increasingly connected. If investor sentiment towards AI sours — and there are signs this may be happening — then the unwind could get messy.
Today’s key market moves
STOCKS: Asia mostly higher, Indonesia -3.5%. Europe, UK slide around 1%. France -1%, although Italy and Spain fall more. Nasdaq +1.1%, S&P 500 +0.4%, Dow flat.SECTORS/SHARES: Four sectors on the S&P 500 rise, seven fall. Tech +1.2%, consumer cyclicals +2.7%. Utilities -2%. Western Digital +6%, Amazon +5%. JPMorgan Chase -2%.FX: Dollar rises vs most G10 except Aussie, Canadian dollars. China’s yuan hits four-year high vs dollar.BONDS: French yields, spreads leap. US yields up around 3-4 bps across the curve.COMMODITIES/METALS: Oil mixed — Brent -0.5%, WTI +2%.
France, Brazil, the US — just a few of the countries where polarized politics and looming elections are becoming increasingly important risk factors for investors to consider. France isn’t the only country in Europe — or the world — facing unenviable fiscal challenges, but the riots spreading across the country are unlikely to make meeting them any easier. Brazilians go to the polls on Sunday in a closely contested runoff presidential election vote, and the US midterm elections barely two weeks away could see President Donald Trump’s Republican Party lose control of both houses of Congress.
Affordability, inflation, high energy prices, and worries over job security amid the AI revolution are issues dominating the national conversation in every country. Policymakers gathered in Bangkok for the IMF/World Bank meetings last week shared calls for fiscal discipline, AI vigilance, and tackling global trade imbalances. But that’s easier said than done when domestic politics are so fractured everywhere, and the spirit of multilateralism is its lowest in decades.
FXing a hole
China’s economy grew by 4.5% in the third quarter, official figures on Monday showed. The good news — that was faster than economists had expected; the not so good news — it was driven by roaring exports, which are putting the country on course to top last year’s record $1.2 trillion trade surplus. China’s bulging surplus is a key contributor to the expanding global imbalances that the IMF and others are warning about.
