AI capex funding fears trigger tech-led equity selloff
Renewed doubts over the sustainability and financing of the AI buildout drove a sharp risk-off session, with the Nasdaq falling 2.6% (worst day since June) and the S&P 500 down 1.2%. Meta slid nearly 7% on negative free cash flow and higher capex guidance, while Nvidia's CEO warned of a "scarcity of capital" for AI infrastructure. Continued selling pressure in AI-linked names and credit spreads could keep equities volatile into next week's megacap earnings.
Significant Geopolitical Events with US Economic Impact
Middle East tensions push Brent above $113
Iran's IRGC reportedly warned it may target US bases if commercial ships continue transiting the Strait of Hormuz, sending Brent crude up 4% to $113.17, the highest since May, with WTI at $99.47. Sustained elevated oil prices raise inflation risk and complicate Fed easing, pressuring equities while supporting energy names.
Jobless claims fall to 194,000, lowest since mid-July
US initial jobless claims dropped 6,000 to 194,000 for the week to 17 October, below expectations and the lowest since mid-July, cited as evidence of labour market resilience. Continuing claims rose 25,000 to 1.728 million. The strong data reduces urgency for near-term Fed easing, a headwind for rate-sensitive assets.
Fed funds futures rallied as much as 22 ticks, effectively removing an entire hike from next year's curve, with a December move no longer fully priced. The 28 October FOMC falls inside the November options window alongside megacap earnings and the 3 November midterms, implying elevated volatility. An inflationary oil shock complicates any dovish pivot.
Safe-haven demand drove the strongest Treasury rally in over two years, with the 10-year yield falling as much as 19 basis points to below 5% for the first time in a month and the 2-year dropping nearly 20bp to 4.61%. The move reflects a rotation out of equities and could support duration-sensitive sectors while signalling growth concerns.
Significant Geopolitical Events with US Economic Impact
French bond turmoil widens European spreads
The Germany-France 10-year sovereign yield spread closed at its widest since 2012, up over 15bp to above 174bp, with French OAT yields hitting 24-year highs near 5.14%. Contagion risk from European fiscal instability adds to global risk-off sentiment and safe-haven flows into US Treasuries.
Major Policy Announcements from US Regulatory Bodies
SK Hynix halts Solidigm US IPO plans
SK Hynix put plans on hold for a potential US IPO of its subsidiary Solidigm, citing market conditions and shareholder value concerns, and its shares fell Friday. The decision signals deteriorating sentiment for semiconductor listings and could weigh on chip-sector risk appetite.
October flash PMIs for Europe, the UK and the US, plus UK and Canada retail sales, are scheduled for release Friday. Weak PMI prints would reinforce growth concerns already driving the Treasury rally, while upside surprises could steady equities.