Global markets opened mixed amid a tech stock selloff and Middle East risks

Weekly results and Monday's opening

Global markets ended the week of October 23 in negative territory and opened Monday mixed: concerns over artificial intelligence financing, signals from corporate earnings and risks in the Middle East are carrying over into the new week, Anadolu reports. The potential for a new escalation of tensions between the US and Iran after November's midterm elections continues to restrain investors' risk appetite.

US: tech stock selloff and corporate news

On October 23, the New York Stock Exchange closed lower amid pressure on technology stocks driven by doubts about the profitability of AI investments, which spilled over into other sectors. The Dow Jones Industrial Average fell 1.23%, the S&P 500 by 0.52% and the Nasdaq Composite by 0.21%; on Monday, US indices opened higher. AT&T shares plunged 7.96%, T-Mobile 7.71% and Verizon 1.18% on reports that SpaceX is in talks with US mobile carriers to build a nationwide wireless network, while SpaceX shares rose 1.89%. American Express lost 3.62% after its decision to cut about 5% of its global workforce, despite revenue and profit growth in the third quarter. The University of Michigan consumer sentiment index for October was revised up to 48 but remained at a five-month low, while the US manufacturing PMI hit a 53-month high of 56 points, beating expectations.

Europe: protests in France and record bond yields

European markets closed lower on October 23 amid ongoing protests in France and rising oil prices. The yield on 10-year French bonds jumped to 5.07% — the highest since 2002. Moody's noted that France's 'Aa3' rating rests on a rich and diversified economy and strong state institutions, but a fragmented political landscape, instability, a high debt burden and weakening debt service metrics remain concerns. France's composite PMI for October, according to preliminary data, fell from 51.1 to 48.4 — a four-month low; the eurozone manufacturing PMI came in at 52.4, slightly below expectations, while Germany's was 52.8, beating estimates. The DAX 40 lost 0.75%, the FTSE 100 0.32%, the CAC 40 0.36%, while Italy's FTSE MIB 30 gained 0.36%; on Monday, European indices opened higher.

Asia and commodity markets

By Monday's close, Asian stock markets were trading lower, except for Hong Kong, as losses on the New York Stock Exchange spread to the region; lingering concerns about domestic demand in China continue to weigh on Chinese stocks. The Nikkei 225 fell 0.3%, the Shanghai Composite 0.2%, the Kospi 0.7%, while Hong Kong's Hang Seng rose 0.4%. December-delivery Brent crude fell 1.9% to $114.50 per barrel after reports that Qatari mediators had traveled to Tehran to arrange talks with the US. The yield on 10-year US Treasuries fell three basis points to 4.97% amid increased demand for safe-haven assets; the dollar index dropped 0.2% to 101.7, while gold rose 0.5% to $4,015 per ounce.

Political developments and the week ahead

According to unofficial reports, Luiz Inacio Lula da Silva won the second round of Brazil's presidential election; contrary to expectations, the result caused a Tokyo-listed ETF of Brazilian stocks to fall about 15%, while the dollar's rate against the Brazilian real declined 0.1% to 4.9780. US President Donald Trump is reportedly considering the use of the 'mother of all bombs' against Iran: “It is not nuclear at all, it is simply an extremely large bomb — like a small nuclear bomb,” he said in an interview last week. This week, market attention is focused on the decisions of the Federal Reserve, the ECB and the Bank of Japan: the Fed, as expected, will keep rates unchanged, but its forward-looking assessment will be key amid inflationary pressure; the ECB is expected to keep its three key rates, and analysts note that if energy prices rise further and the outlook for European economic growth remains weak, the bank may have to choose between fighting inflation and supporting economic activity. The Bank of Japan, as expected, will not change its rate. Also on this week's agenda are data on US economic growth and personal consumption, as well as earnings reports from Amazon, Microsoft and Alphabet.

Why this matters

The synchronized decline of US, European and Asian indices amid doubts about the return on AI investments shows that the tech stock selloff has grown into a global phenomenon affecting other sectors as well — from telecom operators to banks. For investors and companies, what matters in practical terms is the decisions of the Federal Reserve, the ECB and the Bank of Japan this week: it is their forward-looking assessments that will determine borrowing costs, while the reports from Amazon, Microsoft and Alphabet will provide direct guidance on the state of the AI sector. It remains unclear whether pressure on the markets will persist after these decisions and how events around the US and Iran will unfold.