LONDON: A rout in global tech shares eased on Friday, after concerns over the enormous funding needs of AI had hammered Wall Street and triggered the biggest rally in Treasuries in over three years.
Asia's bourses brought calm overnight and though Europe ticked 0.3% lower, there was welcome respite from the pressures that have blown 'le spread' between French and German bonds out to euro zone crisis levels in recent days.
There was no let up from oil though as Houthi attacks on Saudi Arabia and reports that the US and Israel had drawn up plans for renewed strikes on Iran after the US midterm elections lifted Brent to a new five-month peak of US$114 a barrel.
European natural gas prices leapt another 4% too to leave them almost 30% higher already this month.
"It's certainly a nervy market," said Societe Generale's Global Head of Currency Strategy, Kit Juckes.
"The oil price is just grinding higher... and we've got an inevitable correction in tech after its huge run-up, so it's actually hard to see why dollar isn't higher."
The US currency was 0.2% higher on the day against its main basket of other top currencies, but it remains flat for the week.
The euro meanwhile was headed for a moderate weekly loss, which was not bad at all, Juckes added, given all the bond market risk. The yen was on track for its biggest rise in almost a month after attracting safe-haven demand.
For the jittery Wall Street bulls, Nasdaq futures NQc1 were off 0.1%, while S&P 500 futures ESc1 slipped 0.2% after Thursday's 2.6% tumble had been the Nasdaq's biggest slump since June.
The Philadelphia SE Semiconductor Index whose firms are at the centre of the AI boom, plunged almost 7%. The likes of Meta dropped nearly 8%, whilst CoreWeave’s share price fell 10% to its lowest since May 2025 as the cost of insuring its debt leapt too.
Back in the bond markets, US Treasury yields were back under the 5% level after Thursday's run for safety by investors had fuelled their biggest one-day drop since March 2023.
Markets have also started paring back bets on global interest rate hikes. Almost a full quarter-point US Fed rate hike for next year has been stripped out this week amid the concerns over AI.
A December Fed hike is no longer fully priced either, with the implied probability falling to 85%. In Europe too, the chance of an ECB December hike is down to 69% from 90% earlier in the week, Deutsche Bank's Jim Reid pointed out.
AI rally runs aground
In Asia, Japan's Nikkei had dipped 0.3% to end its week down over 4%, while South Korea's KOSPI ended its session higher but after shedding as much as 4% early on.
Mainland China's blue-chips found support after hitting the lowest since July 2025, with the CSI300. CSI300 closing the day up 1.7%. Hong Kong's Hang Seng also rose 0.7% after dropping 3% on Thursday.
"It is hard to get too bearish on equities overall just yet, with earnings growth still positive and the hard economic data holding up well," said Diana Mousina, deputy chief economist at AMP.
"All of this means that the AI trade isn’t necessarily over, but it is changing. It is no longer a case of 'buy everything'."
Gold failed to catch any safe-haven demand though, and was flat at US$4,021.99 an ounce in London after a near 3% drop on Thursday that leaves it down 3.4% for the week.