Shares slip as bond bashing rumbles on

Global shares slid on Thursday as strains in sovereign bond markets were aggravated by a jump in oil prices and reports that some major tech firms were seeking to raise billions in debt in direct competition for limited funding. Wall Street looked set for a bumpy start as the US 10-year rate nudged higher again and as Europe's traders sent their region's stocks to a near 3-month low amid extensive handwringing over France and other heavily indebted countries' finances. A whole flock of European Central Bank policymakers also issued fresh inflation warnings to feed the debate on its next move, while oil prices reared up nearly 5% too following an increase in attacks on shipping in the Gulf. While lofty US Treasury yields underpinned the dollar, the euro struggled near a 17-month low as the concerns over "le spread" in France continued to spread to Italian and Greek debt, as well as parts of the banking sector. "Markets are going to be watchful if that contagion continues," Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, said. "At this stage, the markets would be most comforted by monetary intervention," he added, referring to the ECB buying bonds to ease the market strains. "But I think what we learned in the euro zone crisis in 2011, is that monetary authorities will turn to the fiscal authorities first to get their house in order." The steady climb in borrowing costs left the benchmark US Treasury yield just off its recent 24-year peak and put equities on the defensive. The pan-European STOXX 600 fell as much as 1% to its lowest since June before clawing back roughly half of the ground, while the CAC-40's drop in Paris left it 12% down from an August record high. European banks suffered as well, with the finance index down nearly 1.5% by mid-afternoon as Deutsche Bank , Santander, Societe Generale and Unicredit all fell for a second day. Overnight in Asia, Japan's Nikkei had shed 1.4% and South Korea's chipmaker-heavy KOSPI slumped 2.6%, while Wall Street futures had the S&P 500 and Nasdaq pointing to a modestly lower start. AI DEBT RUSH In commodity markets, Brent futures rose back to $105 a barrel in their biggest jump in a month, while US crude futures added 3.2% to $91.43 a barrel. The US quarterly earnings season picks up pace next week with big banks including JPMorgan set to report results. Optimism around strong earnings has buoyed US stocks lately despite shaky geopolitical developments and concerns about rising interest rates. The tech and energy sectors are expected to report the biggest quarterly earnings growth, while the broader S&P 500 is expected to post a punchy 30.6% increase in quarterly earnings, according to LSEG data. Debt remains a strong underwater current though. The Wall Street Journal had added to media reports on Wednesday that SpaceX, Broadcom and Oracle were all looking to raise serious money to buy high-end AI chips. Broadcom was looking for $50 billion in financing, while SpaceX was planning to issue $30 billion in investment-grade debt and raise $10 billion in loans to buy chips from Nvidia , which is a major shareholder in SpaceX. The news saw credit default insurance on SpaceX jump to record highs, while its shares and bonds lost ground. "Part of the reason why (equity) markets are OK right now is the 30% earnings growth expectations," said Boston Partners strategist Mike Mullaney." But with the so-called AI focused "hyperscalers" expected to spend more than $10 trillion in terms of capital expenditure – or 8% of US GDP – "the math (on earnings and company valuations) doesn't work for me". SOVEREIGN BONDS VS CORPORATE DEBT Still, the fact much of this money will be spent on AI equipment is set to be positive for earnings in the semiconductor and memory sectors. Samsung Electronics on Thursday projected a 783% jump in third-quarter operating profit to 107.4 trillion won ($80.17 billion), though its shares lost 2.4%. TSMC, the world's largest contract chipmaker, also reported a record third-quarter revenue of T$1.49 trillion ($46.71 billion), up 50% from the year-earlier period. Its shares fell 1.35%. All this corporate debt is coming at a time when sovereign bond markets are being sorely tested by inflation fears, ever-widening budget deficits and rising cash rates. Minutes of the Federal Reserve's last meeting released on Wednesday showed "most" members considered another rate hike likely by year-end, though they would approach each meeting with an open mind. Markets imply just a 19% chance the Fed will move again this month, but are 80% priced for a rise in December. "We expect a second Fed hike in December, though we see a strong chance the Fed ultimately concludes further tightening is unnecessary," analysts at Goldman Sachs wrote in a note. The prospect of a pause in tightening helped keep 2-year Treasury yields at 4.80%, while 10-year yields crept up to 5.33% in European trading, having hit a 24-year top of 5.36% overnight. Strains in the French bond market led Bank of France head Emmanuel Moulin to acknowledge the country's economic situation was serious on Wednesday, but he said it did not need help from the European Central Bank. Investors reacted by offloading the euro, which was pinned at $1.1185 after having lost 0.6% on Wednesday. A break of the recent low at $1.1161 would risk a retreat to $1.1065. The dollar was the main beneficiary of the single currency's woes and its index rose to 102.34, near an 18-month peak. It was steady on the yen at 158.22, with the Japanese currency protected by the threat of intervention. Non-interest-bearing gold has suffered as yields climbed, but managed a modest 0.6% bounce to $4,136 an ounce having found bids at two-month lows.