Global markets trade lower as AI pressure remains and bond yields continue to rise

Global markets are trading lower due to heavy selling pressure in the bond market, uncertainties over artificial intelligence (AI) firms, and ongoing tensions in the Middle East.

Investors are cautious ahead of major central bank rate decisions as the Middle East conflict keeps oil prices and bond yields high.

Iranian-backed Yemeni Houthis targeted Saudi Arabia in a recent attack, fueling oil supply concerns and driving November-delivery Brent crude oil up 1.7% to $107.4 a barrel.

US President Donald Trump said oil prices would fall when the Iran conflict ends.

The US 10-year Treasury yield rose to its highest level since July 2007, at 5.03%, due to the rapid rise in oil prices, triggering concerns that high inflation could become permanent.

The Fed is increasingly likely to tighten monetary policy to combat inflation, driving selling pressure on bonds.

The Fed commences its two-day policy meeting on Tuesday, with markets expecting a rate hike with high certainty. The last time the bank raised rates was in July 2023.

The US dollar is trading up 0.1% at 99.6 on Tuesday, while gold is also up 0.1% at $4,305 per ounce despite the rising dollar index, oil prices, and bond yields.

Meanwhile, calls to slow down AI development continue to influence market direction.

Whether AI firms will coordinate in slowing down AI development remains uncertain, given the intense competition between the US and China.

Trump called claims that AI will spiral out of control “a hoax.”

The US Treasury Department added Russia’s VTB Bank to its sanctions list for allegedly evading sanctions under Washington’s Operation Economic Outcast.

The New York Stock Exchange closed lower Monday due to concerns over a slowdown in AI development, affecting chipmaker shares.

Shares of Nvidia dropped 3.4%, AMD fell 4.4%, Broadcom declined 4.8%, Intel decreased 5.6%, and Marvell Technology was down 7.3%.

The Dow Jones Industrial Average fell 0.29%, the S&P 500 dropped 0.48%, and the Nasdaq contracted 0.56% on Monday. American indexes started Tuesday on a negative trend.

Meanwhile, European stock markets also traded in the red, except for the UK, as rising oil prices dampened risk appetite and accelerated declines in tech stocks.

Shares of Dutch tech firm ASML fell 6.1%, while shares of Germany’s Infineon Technologies declined 7.7%.

Europe’s exposure to calls for a slowdown in AI development may have been more limited than that of the US and Asia, analysts say.

Mining stocks fell due to declining copper prices in the region, while the UK stock market defied the regional trend as rising oil prices supported energy stocks.

Germany’s 10-year bond yield reached its highest level since 2009, at 3.55%.

Italy’s FTSE MIB 30 fell 1.68%, France’s CAC 40 dropped 0.76%, and Germany’s DAX 40 was down 0.5%, while the UK’s FTSE 100 gained 0.44% on Monday. European indexes kicked off Tuesday in negative territory.

Near Monday’s close, Asian equity markets traded lower, following the rest of the globe.

China’s retail sales rose 0.4% on an annual basis in August, below estimates, while the country’s fixed-asset investment fell 7.2% at the same time, worse than expected.

China’s unemployment rate came in above estimates at 5.3%, while its industrial production rose 5.2% in August.

These macroeconomic developments may have intensified the pressure on Beijing to provide further fiscal support, highlighting the ongoing challenges facing the Chinese economy.

South Korea’s Kospi fell 0.6%, Hong Kong’s Hang Seng declined 0.2%, China’s Shanghai Composite dropped 0.1%, and Japan’s Nikkei 225 was down 0.1% near Monday’s close.