Escalating Middle East tensions and a renewed surge in oil prices dominated global markets on Thursday, reigniting inflation concerns and pushing bond yields higher. Equity markets weakened across the US and Europe after capital expenditure forecasts from major technology companies spooked investors.
A sharp rise in oil prices and renewed concerns over AI capital expenditure drove US equities lower. TheDOWfell -1.1%, theS&P 500declined -1.3%, and theNASDAQdropped -2.4% as investors reacted negatively to stronger AI spending plans fromAlphabet(-7.0%) andTesla(-13.0%), alongside Brent crude climbing back above US$100 per barrel. Initial jobless claims unexpectedly fell to 187,000, the lowest level since 1969, reinforcing labour market resilience and adding to concerns that the Federal Reserve may need to keep monetary policy restrictive for longer. Stocks in the semiconductor supply chain, includingMicron Technology(+2.5%), gained as investors viewed Alphabet’s increased infrastructure spending as supportive for memory demand, whileAmerican Airlinesfell around -7.5% after warning soaring fuel costs could eliminate profits this year.Thermo Fisherjumped +9.1% after comfortably beating earnings expectations and lifting full-year guidance, reinforcing confidence that the recovery in biopharma and research spending is gaining momentum. Defence stocks also rallied broadly asLockheed Martin(+11.0%) andRTX(+7.4%) both delivered earnings beats and upgraded guidance, reinforcing expectations of a sustained defence spending cycle. TheUS two-year yieldadded +5bp to 4.36%, while the10-year yieldrose to 4.70%, up +5bp.
European equities retreated as investors digested higher energy prices and a cautious European Central Bank. TheSTOXX 600fell -1.2% while theFTSE 100lost -0.7%. The ECB left its deposit rate unchanged at 2.25% after June’s +25bp increase but warned that the inflationary effects of the Middle East conflict had yet to fully emerge.Nestlédropped -8.0% after reporting a fall in first-half profit and announcing the sale of half of its water division. In the UK,Segrojumped +7.2% after its board backed the £14 billion takeover proposal fromPrologis.
Lacking the US’s weak lead, Asian and Australasian markets delivered a generally positive performance on Thursday. China’sCSI 300grew +0.2%, theShanghai Compositeedged +0.3% higher, Japan’sNikkei 225rose +0.5%, South Korea’sKOSPIsoared +4.4%, Hong Kong’sHang Sengadded +1.3%, theASX 200gained +0.2%, and theNZX 50increased +0.2%. Korean markets were buoyed bySamsung(+3.7%) andSK Hynix(+4.9%). In Australia,James Hardie Industriessurged +6.1% after reporting quarterly sales and operating earnings ahead of guidance, whileBHProse +1.5% andRio Tintogained +0.5% as higher commodity prices supported miners.
WTI Crudeleaped +5.7% to US$91.79/bbl,Goldfell -2.0% to US$4,046.69/oz, andIron Orelost -0.3% to US$98.39/MT.