London (AFP) – Stock markets mostly fell and oil prices climbed further on Wednesday as higher global bond yields, fuelled by inflation and debt concerns, took a heavy toll on technology stocks. Global bond yields surged to multiyear highs in recent days, reigniting wariness about the huge piles of debt AI firms in particular are taking on to develop their models. Tech-heavy Asian indices closed sharply lower, while European equities, less exposed to the tech sector, were more subdued. London and Frankfurt both dipped, while Paris gained.
Susannah Streeter, chief investment strategist at Wealth Club, said the surge in bond yields was driven by “concerns about persistent inflation, heavy government borrowing and the sheer scale of debt being issued.” “Higher yields make bonds more attractive relative to shares while also raising borrowing costs and reducing the present value of future corporate profits,” she noted. “The effect is particularly uncomfortable for highly valued technology stocks, where valuations are highly reliant on expectations for future earnings.”
World oil prices were up around one percent on Wednesday as the prospect of any Middle East deal dimmed after US President Donald Trump said he would not extend a 60-day truce with Iran. US and Iranian officials have dug in and appear prepared for an extended standoff, dimming hopes for an imminent reopening of the crucial Strait of Hormuz shipping route. That has also stoked inflation expectations and sent US government debt costs soaring. Traders pointed to expectations that central banks could be forced to raise interest rates to combat stubborn inflation.
“Persistent inflationary concerns are worsening due to elevated oil prices, which weighs especially on those countries with an extra reliance on energy imports such as the UK and Japan,” said Richard Hunter, head of markets at Interactive Investor. Official data Wednesday showed that UK inflation jumped to 2.9 percent in July, driven by higher energy bills.
In Asia, Seoul’s Kospi, the poster child of the AI tech rally, lost 5.8 percent as chip titan SK hynix sank almost 10 percent and Samsung nearly eight percent. After the market closed, SK hynix announced it would buy back a massive $29 billion worth of its shares in a bid to support its stock and settle investor nerves. Tokyo shed more than three percent, with Kioxia down 12.6 percent and investment giant SoftBank down more than 10 percent. Shanghai was also sharply lower, while Hong Kong edged higher. That came after US tech and chip giants including Nvidia, Intel, Micron, and Broadcom took a battering on Wall Street on Tuesday, dragging the Nasdaq lower.
– Key figures at around 1030 GMT –
London – FTSE 100: DOWN 0.2 percent at 10,705.54 points
Paris – CAC 40: UP 0.4 percent at 8,541.64
Frankfurt – DAX: DOWN 0.1 percent at 26,105.95
Tokyo – Nikkei 225: DOWN 3.2 percent at 65,326.42 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 25,495.07 (close)
Shanghai – Composite: DOWN 2.4 percent at 3,894.42 (close)
New York – DOW: DOWN 0.2 percent at 53,343.40 (close)
West Texas Intermediate: UP 1.1 percent at $85.00 per barrel
Brent North Sea Crude: UP 1.0 percent at $91.93 per barrel
Euro/dollar: UP at $1.1611 from $1.1577 on Tuesday
Pound/dollar: UP at $1.3564 from $1.3533
Dollar/yen: DOWN at 159.06 yen from 159.64 yen
Euro/pound: UP at 85.63 pence from 85.53 pence
© 2024 AFP
