Global stocks fall, bonds gain as Meta dents tech optimism

Global stocks declined on Thursday as optimism surrounding tech earnings proved transient, overshadowed by lingering concerns about the trajectory of artificial intelligence and the Gulf stalemate. The MSCI's All-World index was on track for its biggest daily loss in two weeks, down 0.4%, with tech stocks from Seoul, Tokyo, Amsterdam, and Paris experiencing significant drops.

Meta, the first of the AI hyperscalers to release quarterly results, reported revenue that surpassed expectations; however, this was swiftly dampened by the company's proposal to issue non-voting shares, reigniting worries about its escalating capital obligations.

Experts noted that the market was experiencing a confluence of factors, seeking a coherent narrative. Ben Laidler, head of macro and equity strategy at Bradesco BBI, emphasized that the dominant AI-driven earnings narrative, which had bolstered US equities and subsequently global stocks, was now in jeopardy.

In Europe, the STOXX 600 index fell by 1%, driven by tech-heavy companies like ASML, Schneider Electric, and Siemens Energy. Preliminary US stock futures indicated a decline of 1% to 2% upon the opening bell, signaling a drop upon the market's resumption.

Meta's shares experienced a decline of approximately 0.8%, while Tesla, which also reported earnings and revised its spending forecast ahead of a potential merger with SpaceX, saw its stock plummet nearly 5% in premarket trading. Oil prices surged as geopolitical tensions escalated, with Brent crude reaching a five-month high of $112 a barrel following additional Houthi attacks in Saudi Arabia.

The uncertainty surrounding potential conflict and supply disruptions in the Middle East had investors uneasy, offering a counterbalance to concerns about inflation's potential escalation and the resulting shift towards government bonds, which saw a decrease in US Treasury yields. The 10-year note fell by 7 basis points to 5.075%, marking the first time it had been lower than that of France in 13 years.

French government bonds were particularly hard-hit, driving yields above 5% for the first time in 13 years due to mounting concerns over social unrest and fiscal control. The euro experienced a 0.8% depreciation against the US dollar, settling around $1.1241, while the dollar index, which gauges the strength of the US currency against a basket of six other currencies, dropped by 0.1%.

Meanwhile, the yen attracted safe-haven demand, leading the US dollar to weaken by 0.7% to 157.1, following a statement by Deputy Bank of Japan Governor Ryozo Himino signaling his willingness to raise interest rates. Gold experienced a modest decline of 1.2% to $4,090 an ounce, while cryptocurrencies such as Bitcoin and Ether both suffered a 3% loss, trading at $82,000 and $2,412, respectively.