Global markets slip as AI debt worries weigh; dollar weakens

Global equities edged lower on Friday, October 16, with the Nasdaq dropping 2.1% as concerns about higher US interest rates and debt-backed artificial intelligence investment continued to weigh on technology stocks. The dollar headed towards a weekly loss, while European shares advanced, according to Economic Times Markets.

The S&P 500 fell 1.09% and the Dow Jones Industrial Average lost 0.34%, surrendering earlier gains. The S&P 500 and Nasdaq ended the week lower, but the Dow retained a weekly gain. The MSCI World Equity Index declined 0.40% and also recorded a weekly loss.

Trading followed a sharp technology-led selloff on Thursday. Stronger-than-expected inflation figures released on Wednesday had prompted traders to increase bets on further US rate increases, adding to unease about the financing required for the AI infrastructure expansion.

AI financing scrutiny hits technology shares

Technology and communication services led Wall Street's declines, while utilities and energy were the strongest-performing sectors. CoreWeave shares fell 12% on Friday, bringing their weekly decline to about 25% as investors examined the financial foundations of the AI buildout.

Tom Plumb, portfolio manager at Plumb Balanced Fund, pointed to uncertainty over which businesses would ultimately benefit from data-centre investment. While expecting substantial winners, he stressed that financing capacity and liquidity—not simply the balance between assets and liabilities—could determine whether companies withstand financial pressure.

Europe gains as Indonesia suffers a sharp fall

European markets, which had suffered less during Thursday's selloff, recovered. The STOXX 600 rose 0.72% and London's FTSE 100 gained 0.38%; both finished the week higher.

Most Asian stock markets also advanced as investors unwound some of the previous session's moves. Indonesia was a stark exception: the report said its equities suffered their largest decline since 1998 after MSCI said the market no longer qualified for emerging-market status and set out plans to remove it from major fund-tracked indexes.

Dollar heads lower despite a late rise in US yields

The dollar index fell 0.26% and was on course for its first weekly decline after four consecutive weekly gains. Lower Treasury yields over the week reduced the currency's appeal as investors sought government bonds amid concerns about AI companies' finances.

The euro recovered from a recent 17-month low, rising 0.16% to $1.1238. The yen edged up 0.01% to 157.98 per dollar.

Bond yields moved higher on Friday despite the broader week's retreat. The benchmark US 10-year Treasury yield reversed an earlier decline to rise 0.17 basis points to 5.085%, while Germany's 10-year yield increased 1.14 basis points to 3.421%. G7 government bonds were heading for their strongest weekly performance since late May.

Oil climbs on Middle East supply concerns

Brent crude futures rose 3.72% to settle at $109.86 a barrel and were heading for a second consecutive weekly gain. The report linked the advance to concerns over Middle East supplies, saying attacks around the Strait of Hormuz had increased over the preceding 10 days.

Gold received support from the weaker dollar, gaining 0.07% to $4,167.14 an ounce.