Global Markets: France concerns weigh on Europe, while Wall Street looks to AI earnings

Tesla

Mon 10:26

European shares fall as France unrest stokes fiscal concerns
Wall Street futures rebound ahead of pivotal AI earnings week
Oil retreats after Trump waives some Russian sanctions
China growth beats forecasts as retail sales surprise
Updates after European open
By Danilo Masoni and Wayne Cole
MILAN/SYDNEY, Oct 19 (Reuters) - European stocks and the euro fell on Monday as unrest in France added to concerns about the country's fiscal outlook, while Wall Street futures rebounded from last week's tech-led selloff ahead of a big week of earnings from AI heavyweights.
Europe's STOXX 600 .STOXX fell 0.7% by 0837 GMT, while the French blue-chip CAC 40 index .FCHI dropped over 1% as protests highlighted the government's struggle to rein in its large budget deficit.
The euro fell 0.3% to $1.1203 EUR=EBS, near last week's 16-month low of $1.1113, as the US dollar index =USD rose 0.2% to 101.9.
A fall in oil prices following President Donald Trump's decision to waive some sanctions on Russia offered some support to broader markets, though investors remained focused on whether massive spending on artificial intelligence will pay off.
"Investors will want to hear more than another ambitious spending plan: they will want evidence that AI is helping generate enough revenue and profit to justify the bill," said Ipek Ozkardeskaya, senior analyst at Swissquote.    
Wall Street looked set for a firmer open. Nasdaq futures NQc1 rose 1.1% and S&P 500 futures ESc1 gained 0.6% after a bruising week in which the Philadelphia Semiconductor Index .SOX tumbled 11.4% in its longest losing streak since 2008.
Investors will be hoping Meta META.O will beat forecasts when it announces earnings on Wednesday, alongside semiconductor firms Lam Research LRCX.O and Texas Instruments TXN.O and Tesla TSLA.O. Results from SpaceX SPCX.O are due Tuesday.
Meta is one of five AI hyperscalers that combined are expected to increase their capital spending to about $1.2 trillion next year, according to Goldman Sachs.
Overall US earnings are still expected to rise about 30%, largely driven by the technology sector.    
     
RISKS IN VIEW    
Trump said a final decision on the Russia sanctions waiver had not been made, while Secretary of State Marco Rubio said the president would take up to 60 days to assess the impact of such a move.    
Meanwhile, Iran reported another tanker had hit a mine in the Strait of Hormuz, leaving investors weighing whether higher energy costs could feed through to inflation and growth.
"Until the situation becomes clearer, inflationary pressures will continue to mount, keeping central bankers under pressure and weighing on growth prospects," economists at CIC Market Solutions said in a note.
Geopolitical risks in the Middle East kept investors cautious, helping extend a rally in US bonds, with 10-year Treasury yields down 2.5 basis points (bps) at 5.07% US10YT=RR, having just recorded their largest weekly fall in more than eight months. 
In Europe, however, concerns over France's fiscal outlook kept pressure on sovereign debt. France's 10-year yield was up 7.3 bps at 4.857% FR10YT=RR, while safer German 10-year yields DE10YT=RR rose 1.6 bps to 3.425%.
Oil prices remained under pressure, with Brent futures LCOc1 falling 1.8% to $104 a barrel after hitting their highest level in five months on Friday. US crude CLc1 lost 1.9% to $99.4 a barrel. O/R
     
CHINA GROWTH BEATS EXPECTATIONS
Earlier in Asia, shares were mixed. Japan's Nikkei .N225 fell 0.6%. South Korea's .KS11 gained around 1.8%, while Taiwan's .TWII fell 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan .MISX00000PUS added 0.01%.
Chinese blue chips .CSI300 edged up 0.1% after data showed the economy expanded 4.5% in the third quarter, slightly above forecasts. Retail sales also topped expectations with a 1.1% rise in September, while industrial output growth matched forecasts at 5.5%.
China's yuan firmed to its strongest level against the US dollar since June 2022 at 6.6815 CNY=.
Jakarta's equity benchmark .JKSE fell 3.6% to fresh lows, reeling from index provider MSCI saying it was considering shifting Indonesia to "standalone" status from its current "emerging markets" classification. 
Elsewhere, gold XAU= gained 0.3% to $4,183 an ounce as lower bond yields boosted demand for non-yielding assets, while bitcoin BTC= rose 2.1% to trade back above $82,000.  

 (Reporting by Danilo Masoni and Wayne Cole; Editing by Stephen Coates, Kevin Buckland and Xevi Fontdegloria)
 ((Danilo.Masoni@thomsonreuters.com))