The key facts

  • Brent rose to $115.45 per barrel — a five-month high; WTI gained 2.3% to $101.76
  • Kering lost more than 16%, Volvo Cars more than 26% after weak earnings; Volvo announced a 5 billion kronor savings plan and about 2,500 job cuts
  • Investors doubt the sustainability of AI spending funded by debt; next week bring Fed and ECB meetings

Oil at a Five-Month High

Oil prices traded at five-month highs on Friday: Brent futures for December rose to $115.45 per barrel amid the ongoing conflict in the Middle East. According to AFP, Brent gained 1.9% to $115.29, while WTI rose 2.3% to $101.76. AJ Bell analyst Danny Hewson noted that prices are being pressured by speculation about possible new US and Israeli strikes after the November US midterm elections, escalating tensions around Ukraine, and rising energy demand with the onset of winter in the northern hemisphere.

US and European Markets Under Pressure

The main Wall Street indices declined at the start of trading: the Dow fell 1.0% to 52,362.08 points, the S&P 500 fell 0.5% to 7,628.15, and the Nasdaq Composite fell 0.4% to 25,914.05. According to the analyst, constant oil market worries have deprived investors of the usual 'buy the dip' momentum that had previously helped stocks avoid declines. High oil prices, as the analyst noted, keep inflation and rate-hike risks in focus. European indices also mostly declined: the FTSE 100 fell 0.6%, the CAC 40 fell 0.9%, and the DAX fell 1.1%. Asian indices ended the week mixed: the Nikkei 225 lost 0.3%, while the Hang Seng and Shanghai Composite rose 0.7% and 0.9% respectively.

Doubts About the Sustainability of AI Spending

Markets, according to Hewson, are simultaneously facing rising oil prices and the question of the sustainability of artificial intelligence spending. FOREX.com analyst Fawad Razaqzada noted that Meta and chip equipment maker Lam Research, despite better-than-expected earnings, lost value this week: 'Good results are no longer enough if forecasts do not meet an already demanding valuation. Investors are becoming far less forgiving.' High borrowing costs, AFP notes, could hurt AI development, which is funded by debt and has supported stock market growth this year.

Weak Earnings: Kering and Volvo Cars

Shares of French luxury group Kering, owner of the Gucci brand, fell more than 16% during trading in Paris after an earnings report that failed to convince investors of a recovery in the key Gucci brand. Volvo Cars plunged more than 26%: the company reported a third-quarter loss, which it attributed to US tariffs and strong competition from local brands in China. In response, Volvo announced a new savings plan worth 5 billion kronor, which is expected to lead to the elimination of about 2,000 jobs in Sweden and another 500 in other countries.

What's Next

Next week, in addition to the oil market, the AI sector and corporate earnings, market attention will focus on meetings of the US Federal Reserve and the European Central Bank, as well as data on US economic growth. The euro fell to $1.1198, the pound to $1.3374, and the dollar dropped to 156.44 yen.