Oil prices plummet, the Fed tightens its grip, and AI tensions rise: markets seek balance.
Hopes for geopolitical easing buoyed stock markets, but macroeconomic data prompted investors to be cautious. The collapse of oil prices offered relief to the stock markets, while US inflation rekindled fears of a more aggressive Federal Reserve. In the background, renewed tensions are testing the technology sector.
US inflation: the Fed returns to center stage
In the United States, October inflation rose 0.4% month-on-month, above the 0.3% forecast. The decline in energy prices, in fact, is not automatically spreading to the entire economy: services and housing continue to hinder the Fed's return to its target.
Christopher Waller has opened the door to a 50 basis point rate hike in December if price dynamics dictate. This isn't a firm decision, but it's a significant signal. The yield on the two-year Treasury note has risen to 4.74% , while the yield on the ten-year note has nearly reached 5% : movements that increase the cost of capital and penalize growth-oriented companies in particular.
Wall Street's volatility reflects this contradiction. The initial recovery, with the S&P 500 up 2.3% and the Nasdaq up 2.7% on Monday, gave way to selling after the price data. The cost of borrowing therefore remains a constraint on the stock markets.
Middle East: Lower oil premium, but peace remains uncertain
The energy sector's turnaround was largely driven by Donald Trump's comments, which deemed renewed bombings against Iran unlikely if efforts to reach an agreement continued. Prices responded quickly: Brent crude fell toward $90 a barrel , reflecting a reduction in the geopolitical premium embedded in prices.
The market, however, is betting on a still-uncertain détente. Tehran has denied that genuine direct negotiations with Washington are underway and continues to demand an end to the blockade of its ports. Maritime routes remain fragile. In Riyadh, a Saudi Aramco administrative building was damaged by debris that fell after intercepting missiles launched by the Houthis: a sign of the still-high risk, even without production blockades.
The diplomatic component is compounded by a more concrete supply and demand dynamic. According to JPMorgan, the global oil market has returned to surplus, reaching approximately 1.4 million barrels per day in October. Recovering trade flows and less buoyant demand are amplifying the decline, without eliminating supply risks.
Ukraine and world trade: diplomatic glimmers, deep divergences
Another signal investors are following comes from Abu Dhabi, where Russia and Ukraine have resumed US-mediated talks after months of stalemate. The confrontation has reopened diplomatic space, but hasn't resolved the crucial issues: Moscow insists on its territorial demands and a new European security framework, while Kiev refuses to make concessions that compromise its sovereignty. Meanwhile, attacks on energy infrastructure continue.
On the trade front, Beijing extended the suspension of additional tariffs on US imports, at least temporarily reducing the risk of a tariff clash. Chinese data also suggest an economy capable of competing abroad: exports in October grew 35.2% and imports 41.6% compared to the previous year. However, strong technology exports coexist with weak domestic consumption.
European stock markets and banks: a rotation beyond American technology
The decline in energy prices benefited European stock markets in particular. The STOXX 600 gained 1.26% on Monday and then approached all-time highs, supported by the prospect of lower inflationary pressures and a widespread recovery in cyclical sectors. Bank consolidation also gained momentum: Crédit Agricole proposed the merger of its Italian subsidiary with Banco BPM, sending the Milanese bank's stock soaring and refocusing attention on the pursuit of scale and synergies in European credit.
It remains to be seen whether the recovery is based on lasting fundamentals or simply on energy relief.
Nvidia Under Scrutiny: AI Meets Politics and Governance
In the United States, the midterm elections have fueled doubts about future data center regulations, including energy consumption, community impact, and investment sustainability. Technology is also impacted by regulatory uncertainty.
The Nvidia affair has further heightened the tension. The board of directors announced an independent investigation following reports that Jensen Huang had been the target of a foreign intelligence operation. The company clarified that it has no reason to believe its industrial secrets or national security have been compromised; the investigation is therefore a verification, not evidence of wrongdoing. The stock, however, lost about 4.3% on Monday, demonstrating how important trust in leadership is for a key company in the artificial intelligence industry.
Gold amid relief and yield concerns
Gold also followed opposite trajectories. It initially recovered more than 1% , supported by a weaker dollar and the idea that cheaper oil could ease pressure on interest rates. Then the US inflation data reversed the picture: the metal retreated by about 2.3% , towards $4,044 an ounce , impacted by the rise in expected real yields and the strengthening of the US dollar.
The situation remains precarious: geopolitics offers relief, while inflation and the cost of money direct capital. Rather than an indiscriminate recovery, what's emerging is a selective focus on sectors and geographic areas, where profit stability matters as much as international news.