LONDON - Technology shares got a boost from a resurgence of optimism over AI on Tuesday, while the broader equity market struggled to make much headway as oil rose back above $100 a barrel and bond yields headed higher once more.
The viral popularity of Meta Platforms' Muse AI assistant since its launch two weeks ago sent the company's stock soaring on Monday, reviving enthusiasm for the tech sector after grim warnings from AI chief executives a week earlier triggered a global selloff in AI-linked shares.
Semiconductors were among the few gainers in Europe on Tuesday, where the STOXX 600 fell 0.2 percent, having gained 1 percent the day before.
Meta shares jumped by more than 11 percent by the close on Monday in their largest one-day rise since April 2024, helping propel a range of AI-linked stocks, such as AMD, which hit the $1 trillion mark, while Intel and Arm Holdings jumped 12.2 percent and 17 percent, respectively.
"This suggests that demand for costly AI tools is robust and worth the hundreds of billions of capex spent by the hyperscalers," Kathleen Brooks, research director at XTB, said.
"If there is widespread adoption of Muse, it could add to demand for other AI tools, which could lift the AI sector, after a rough few months," she said.
Nasdaq futures were down 0.1 percent, suggesting a slight dip at the open for the index, which hit record highs on Monday, while S&P futures were down 0.1 percent.
Meanwhile, Brent crude futures were up 1.4 percent at $101.67 a barrel after dropping over 3 percent the day before, when they briefly fell below $100 for the first time in two weeks.
Oil futures are still up about 12 percent this month, and the physical market is showing that stress is creeping in. Prices for immediate delivery of some types of crude in northwest Europe, for example, are above $130, up nearly 50 percent so far in September.
Rate hikes on the way
With energy prices showing no meaningful retreat, investors are pricing in another round of rate hikes from major central banks, which helped underpin the dollar, but pushed up global bond yields.
The dollar rose the most against the yen, up 0.26 percent at 157.7, hovering near a three-week high, as support faded for the Japanese currency from the expectation for quicker rate hikes from the Bank of Japan.
The BOJ raised rates last week to a 31-year high but two dissenting votes and lack of explicit hawkish guidance disappointed investors, leaving the yen vulnerable and stoking intervention jitters.
"FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen," said Matthew Ryan, head of market strategy at Ebury.
The Federal Reserve, by contrast, raised rates last week and warned its fight against inflation was not over, keeping the door open to further tightening.
The dollar index, which tracks the US currency against six others, was near seven-week highs, as US 10-year Treasury yields edged up to 4.969 percent, not far off October 2023's 16-year high.
