Global equity markets rebounded Monday, with European benchmarks climbing and crude oil prices dropping, following a volatile week that saw Wall Street indices decline and energy costs hit multi-year highs. Investors are now turning their attention to a critical test of the artificial intelligence investment thesis, as major technology firms prepare to release their latest financial results.
In early European trading, the DAX in Germany rose 0.7% to close at 25,363.59, while the CAC 40 in Paris gained 0.9% to reach 7,848.62. Britain's FTSE 100 added 0.5% to stand at 10,742.88. Futures for U.S. indices also pointed upward, with the S&P 500 contract up 0.2% and the Dow Jones Industrial Average contract gaining 0.4%.
The move in oil provided a counterweight to the equity rally. Brent crude, the international benchmark, fell 1.7% to $109.86 a barrel, while U.S. benchmark crude sank 2.1% to $101.08 a barrel. This pullback follows a sharp spike on Friday, when Brent crude settled at $116.72, its highest level since June 2022. The surge in energy prices has been driven by the U.S. war with Iran, which has severely cut global oil supply and pushed up the cost of goods ranging from gasoline to food and clothing.
Asian markets showed mixed results before some benchmarks recovered ground. Tokyo's Nikkei 225 slipped 0.8% to 62,189.65, pressured by selling in computer chipmakers such as Advantest, which fell 3.9%, and Tokyo Electron, which lost 3.7%. The Bank of Japan is scheduled to announce its key interest rate decision later in the week. In South Korea, the Kospi dropped 1.5% to 5,469.47, with memory chipmaker Samsung Electronics losing 1.1%. Conversely, the Hang Seng index in Hong Kong picked up 0.5% to 23,211.81, and the Shanghai Composite index rebounded from early losses to close at 3,697.52.
The focus this week shifts to corporate earnings from influential AI-related companies, including Alphabet, Microsoft, and Amazon. Analysts suggest that investors are looking for evidence that massive spending on AI infrastructure is generating durable returns rather than just inflating costs. Stephen Innes of SPI Asset Management noted that investors want proof that the billions going into compute buildouts are building a durable earnings machine.
American Express shares slumped 3.7% despite reporting quarterly profits that beat analysts' forecasts, as the company announced its first major job cuts in roughly a decade. U.S. Treasury yields edged higher after sharp drops on Thursday, amid global concerns over government debt and inflation that remains stubbornly above 3%. The Federal Reserve raised its benchmark interest rate at its last meeting to cool inflation, and Wall Street expects rates to be held steady this week but leans toward another hike in December.
The personal consumption expenditures index, the Federal Reserve's preferred inflation measure, is expected to show inflation rose at a 3.7% rate in September, sharply above the central bank's 2% target. In currency markets early Monday, the dollar rose to 157.28 Japanese yen from 156.99 yen, while the euro fell to $1.1212 from $1.1223.