Markets fluctuate as US rate worries temper tech bounce

Markets experienced fluctuations as concerns about US interest rates influenced tech stocks. Following last week's decline, driven by fears of increased regulation of artificial intelligence, beaten-down tech stocks rebounded this week due to bargain buying and reassurance that their fears might have been exaggerated. Positive sentiment was also bolstered by earnings from CoreWeave, a data center operator, which reported sales of $13-13.3 billion (€11.6-11.9bn) for the year, surpassing expectations.

This alleviated concerns over the company's financial stability after experiencing significant selling last month due to worries about its massive debt load amid persistently rising borrowing costs.

The tech sector witnessed further confidence-boosting developments when Anthropic announced plans to raise up to $64 billion (€57.1bn) in its upcoming initial public offering, valuing the company at up to $1.4 trillion (€1.25trn). This IPO figure was initially anticipated to reach $100 billion (€89.2bn), making Anthropic the largest IPO in history. The company's revenue grew substantially to $17 billion (€15.2bn) in the third quarter, compared to just $1.4 billion (€1.25bn) a year earlier.

OpenAI, the maker of ChatGPT, reported a staggering $10 billion (€8.92bn) in quarterly revenue for the period of July to September, marking a nearly 50% increase from the previous quarter and a nearly threefold rise compared to the previous year. However, chipmaker Nvidia remained a focal point due to allegations of an affair involving CEO Jensen Huang and a woman suspected of being a Chinese spy.

Nvidia is currently under FBI investigation. All three major Wall Street indexes closed in the red on Tuesday, ending a two-day rally, while Asian markets experienced a mixed performance. Tokyo, Seoul, and Taipei, where many leading AI-linked firms are based, continued to rise, while Hong Kong, Shanghai, Sydney, Wellington, and Manila saw declines.

Traders are now worried about the potential for a larger-than-expected interest rate hike by the Federal Reserve during its upcoming December meeting. US consumer prices rose 0.4% in October, a slowdown from the previous month's 0.6%, but still exceeded the forecasted 0.3%. While energy prices showed a significant moderation, food prices spiked, along with medical care, household furnishings, and other categories.

Chicago Fed President Austan Goolsbee described the report as "another distressing and borderline disturbing" reading, echoing the concerns of two other Federal Reserve officials. Federal Reserve Governor Christopher Waller called for prompt action to address inflation, hinting at potential support for a 50-basis-point hike in December.

Dallas Fed President Lorie Logan also expressed strong support for swift action to tackle inflation.

Market participants continue to navigate the political implications of the Democratic victory and the economic impact of AI infrastructure. Chris Weston of Pepperstone noted that investors were forced to reassess assumptions regarding future revenues, cash flows, and funding conditions. Factors such as a hotter-than-expected US consumer price print, heightened focus on Anthropic's IPO, and a major buyers' strike on Nvidia created numerous catalysts driving market price action.

Oil prices experienced slight increases after previously falling on hopes for a US-Iran agreement to end the conflict and reopen the Strait of Hormuz. Brent crude hovered around $92 (€82.06) a barrel, down around 20% since the start of the month. Japanese tech investment giant SoftBank saw its shares drop by up to 8% in Tokyo following a $7 billion (€6.24bn) loss in the fiscal second quarter.