A look at the day ahead in European and global markets from Kevin Buckland
Asian stocks are rising into the weekend, with bargain hunters probably leading the buying after the precipitous plunge in markets on Thursday.
But with calm returning after the frenzied AI-centred selling of a day earlier, the question is how long it can last.
The spike in yields to levels associated with distressed debt for AI cloud provider CoreWeave, which stoked fears about the mounting debt pile financing the AI boom, is still there.
As is the reported progress by China’s CXMT on next-gen DRAM architecture that has degraded confidence in the established manufacturers, such as SK Hynix and Micron.
For now, South Korea’s KOSPI is up around 3% following Thursday’s nearly 8% plunge, and Japan’s tech-heavy Nikkei is 1.5% higher after dropping some 5% in the prior session.
US and European stock futures also edged higher.
The outlier is Indonesia, where shares recorded their biggest one-day fall since 1998 and the Asian Financial Crisis, after index provider MSCI announced the stock market no longer merits “emerging market” classification, setting up a downgrade that will force passive funds to pull money from the country.
With tech earnings rolling out over coming weeks, analysts expect volatility to stay elevated. And market swings will be further compounded by the picture around interest rates at the US Federal Reserve and other major central banks.
Treasury yields have found a floor after Thursday’s plunge as investors rushed to the perceived safety of sovereign debt.
US yields had already been unsettled, with investors watching carefully for clues on the path for rates with each data point, and CPI in particular getting attention for highlighting the breadth of price pressures in the economy.
Fed Chair Kevin Warsh played his cards characteristically close to his chest in Bangkok on Friday, where he was speaking at IMF/World Bank meetings, repeatedly saying he doesn’t prejudge the outcome of policy meetings.
Currently markets see about 28% odds for a rate hike at the end of this month.
Bank of England Governor Andrew Bailey was a little more direct in his own comments at the venue earlier on Friday, saying that soaring energy prices due to the Iran war had so far had limited impact on wider inflation in Britain, but it was too soon to draw firm conclusions.
Key developments that could influence markets on Friday:
• Euro-area HICP final for September
• Italy CPI final for September
• US imports, exports, industrial production for September
(Reporting by Kevin Buckland; Editing by Kate Mayberry)
