Global Market Today: Asian shares bend under AI stress; Apple earnings loom

As Asian share markets declined on Monday, apprehension about the viability of the AI investment surge loomed over the technology sector, while the premium on sovereign bonds diminished the appeal of safe-haven status. Fears of insufficient cash flow and the vast scale of AI capex contributed to a surge in the cost of insuring against corporate defaults, which reached a one-year low for gold due to speculation that stressed investors were selling assets to meet margin calls.

The upcoming U.S. midterm elections added another layer of uncertainty, as a Democratic victory in either or both chambers of Congress could introduce additional obstacles for data center development.

Adding to the unease were withdrawals from Binance, the world's largest cryptocurrency exchange, which resumed operations on Sunday following a hack that resulted in billions of dollars being stolen. This incident intensified the pressure for earnings reports this week, with Apple, AMD, and Palantir scheduled to announce results after Intel's sharp 29% decline on Friday.

Goldman Sachs analysts anticipate hyperscaler capital expenditure to nearly double to $800 billion this year, and potentially increase to $1.2 trillion in 2027. However, they foresee S&P 500 earnings per share growth of nearly 30% in 2026, decelerating to 18% in the following year.

Goldman Sachs' chief US equity strategist, Ben Snider, observed in a note that while AI investment spending will continue to rise, the growth rate of AI capex appears to be peaking. Japan's Nikkei dropped 0.5%, while South Korea decreased by 0.8%, having lost 16% last month. MSCI's extensive index of Asia-Pacific shares outside Japan declined by 0.4%. On the European front, EUROSTOXX 50 futures increased by 0.1%, while DAX futures remained unchanged.

On Wall Street, S&P 500 futures edged up by 0.4%, and Nasdaq futures rose by 0.6%. The tech-heavy Nasdaq encountered its worst monthly performance since the tariff dispute of April 2025, losing almost 7% in October. Although the retreat provided a temporary relief for safe-haven bonds, investors remained uncertain whether a sustained stock market sell-off might discourage the Federal Reserve from raising interest rates in December.

Presently, there is a 72% probability of a quarter-point rate hike, but only 55 basis points of total tightening are priced in, compared to over 70 basis points a month ago. Ten-year Treasury yields rose to 4.952%, still far from their October peak of 5.3645%, and 2-year yields remained at 4.612%.

When central banks convene this week, markets anticipate interest rate hikes from the Reserve Bank of Australia, Bank of England, and Riksbank, while Norges Bank is expected to hold steady. Economic data released this week includes the influential US ISM manufacturing survey for October, which is scheduled for release later on Monday, and the crucial payrolls report on Friday.

Forecasts indicate a 65,000 increase in jobs, following September's disappointing 29,000 gain, with the unemployment rate remaining at 4.2%. In currency markets, major currencies remained largely inactive as the majority of focus was on stocks. The euro held steady at $1.1156, and the dollar remained unchanged at 157.62 yen. Oil prices fell after Iranian and Qatari officials engaged in three consecutive days of talks to reach a deal to end the US-Israeli war on Iran.

Brent futures dropped 1.5% to $111.72 a barrel, following a 13.6% increase in October, while US crude futures eased 1.7% to $102.37 a barrel. Non-interest-bearing gold experienced a 0.6% increase to $3,898 an ounce, rebounding from a 6.8% decline last month.