Trading Day: AI storm abates

On Monday, Wall Street experienced a slight recovery as investors reassessed beaten-down tech stocks and awaited crucial earnings reports. The easing of concerns surrounding AI contributed to the market's turnaround, following a week of safe-haven demand in bonds that drove yields higher. Riots and unrest in France had a significant impact on the country's bond prices and the value of the euro, while China's economic growth accelerated due to booming exports and a cautious consumer market.

Meanwhile, global food inflation was anticipated to worsen as supply disruptions mounted. An ex-OpenAI employee was accused of involvement in a device-related incident with potential Saudi backing, according to US prosecutors. Today's market movements included a rise in Asian stocks, a decline in European markets, and a flat Dow Jones Industrial Average.

Among sectors, tech stocks gained 1.2%, consumer cyclicals increased 2.7%, while utilities saw a decline of 2%. The dollar strengthened against most G10 currencies except the Australian and Canadian dollars. China's yuan reached a four-year high against the US dollar, while US yields rose by around 3-4 basis points across the yield curve.

Commodity prices were mixed, with oil prices fluctuating. The French government imposed curfews in several Parisian areas following a weekend of riots, which negatively affected French bond prices and the euro's value. China's economic growth was reported to have accelerated at 4.5% in the third quarter, exceeding economists' expectations, but this growth was primarily driven by soaring exports and contributed to global imbalances.

In response, China's central bank is examining the overnight rate as its primary policy rate. Global food inflation is expected to intensify due to mounting supply shocks. Following the recent AI-related sell-off, sentiment in the US market improved on Monday, with the semiconductor index rebounding 2.5% after an eight-day losing streak.

However, a full recovery remains to be seen. South Korea's KOSPI also rebounded 4% over the past two trading sessions, but it remains down around 20% from its levels from two weeks ago. The polarized opinions surrounding AI technology persist among investors, with both optimistic and pessimistic perspectives. The focus is now on US earnings reports, which will determine if the current stock prices remain justified.