Key facts
- Global shares declined on Thursday.
- Strains in sovereign bond markets were aggravated by rising oil and gas prices.
- Major tech firms are reportedly seeking billions in debt to fund AI chip purchases.
- European shares, including the STOXX 600 and CAC 40, fell to multi-month lows.
- Concerns over French finances spread to Italian and Greek debt, impacting European banks.
- Oil prices, specifically Brent futures, rose back above $104 a barrel.
Global shares declined on Thursday as strains in sovereign bond markets were amplified by a surge in oil prices and reports that major technology firms were seeking to raise billions in debt. This competition for limited funding added to market jitters.
In Europe, renewed selling pressure was seen on the debt of France and other heavily indebted countries, pushing the region's shares to a near three-month low. This occurred as European Central Bank policymakers issued fresh warnings about inflation.
Oil prices climbed nearly 4%, with Brent futures rising above $104 a barrel, amid an increase in attacks on shipping in the Gulf. This added to bond market concerns, despite a strong auction of U.S. 10-year debt on Wednesday that had temporarily pulled benchmark Treasury yields away from 24-year peaks.
The euro struggled near a 17-month low as concerns over France's finances extended to Italian and Greek debt, as well as parts of the banking sector. Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, noted that markets would be most comforted by monetary intervention, such as the ECB buying bonds, but suggested fiscal authorities would likely be addressed first.
The rising cost of borrowing put equities under pressure. The pan-European STOXX 600 fell 1% to its lowest level since June, while France's CAC 40 dropped more than 12% from its August record high. European banks also suffered, with their finance index down nearly 2%, as major lenders like Deutsche Bank, Santander, Societe Generale, and Unicredit saw their shares fall for a second consecutive day.
Overnight in Asia, Japan's Nikkei shed 1.4% and South Korea's KOSPI slumped 2.6%. Wall Street futures indicated a modestly lower start for the S&P 500 and Nasdaq.
In commodity markets, US crude futures added 3.2% to $91.43 a barrel. Reports from The Wall Street Journal indicated that SpaceX, Broadcom, and Oracle were looking to raise substantial funds to acquire AI chips. Broadcom was reportedly seeking $50 billion in financing, while SpaceX was planning to issue $30 billion in investment-grade debt and raise $10 billion in loans. This news led to record highs in credit default insurance on SpaceX, and a decline in its shares and bonds. Nigel Green, CEO of deVere Group, warned that the AI build-out, increasingly funded by credit, poses risks to global investors if expected revenues do not materialize.