Wall Street slows down on AI, the Fed under pressure: Europe fragile and tensions in the Middle East

The end of October brought a question that had been in the background for months back to the forefront of markets: how much does it cost to sustain growth? The answer came simultaneously from central banks, the balance sheets of major technology companies, and commodity prices. The United States continues to show remarkable economic resilience, but inflation is hindering monetary easing; in Europe, however, France's fragility contrasts with still-positive overall growth. In the background, tensions in the Persian Gulf are adding a further energy risk premium.

United States: Robust growth, but the Fed cannot let its guard down

The Federal Reserve left interest rates in the 3.75–4% range, a decision that highlighted internal divisions: some officials would have preferred an immediate tightening. The pause, therefore, does not mean the end of the restrictive phase. The macroeconomic picture makes a different choice difficult: the PCE price index rose to 3.6% annually , while gross domestic product grew by 3.4% annualized in the summer quarter.

This is only a seemingly unusual combination. Consumption, investment, and production are holding up, while energy and services continue to maintain high price pressures. Even labor costs, which rose 0.8% in the quarter , do not signal a collapse in wages.

Dallas Fed President Lorie Logan has indicated the need for two additional 25 basis point rate hikes: a personal stance, not a decision already made by the committee. For bond markets, this means continuing to live with the prospect of expensive financing and increased sensitivity to inflation data.

France in difficulty, Eurozone still expanding

In Europe, the most striking contrast concerns France. Its economy contracted by 0.1% in the third quarter , while harmonized inflation accelerated to 3.8% in October. Weak demand and price increases have thus overlapped, complicating the process of fiscal consolidation.

Fitch has revised its outlook on French debt from stable to negative, citing the fiscal deterioration, rising financing costs, and political difficulties in implementing lasting measures. This decision does not constitute an immediate downgrade, but it does signal increased risks to the future sustainability of the debt.

The signal matters beyond national borders: when the perceived risk on the government bonds of a major economy rises, the pressure can spread to banks and other European issuers. Yet the Eurozone is not stagnant: its GDP grew by 0.4% compared to the previous quarter . The problem, therefore, is not a uniform recession, but an uneven recovery, in which countries face very different fiscal constraints and energy shocks.

Artificial Intelligence: Proof of Profitability on Stock Markets

The sharpest shift was seen on Wall Street. The Nasdaq closed down 2.86% on Friday, as investors began to look beyond revenue growth to question the actual profitability of the race for artificial intelligence.

Alphabet fell 12.6% on Thursday after its results, despite its cloud expansion, revealed negative cash flow and concerns about the pace of search advertising growth.

Amazon has exhibited a similar paradox: its cloud business is growing rapidly, but free cash flow for the last twelve months was negative by $42.4 billion , largely due to infrastructure investments. Intel plunged 28.6% after a disappointing outlook, hampered by the weakness of the computer market and production issues.

This isn't a denial of AI's potential, but rather a sign that investors are demanding greater evidence of return on invested capital. The ability to transform innovation into cash is starting to matter as much as the innovation itself.

In Europe, the STOXX 600 initially benefited from strong energy and industrial quarterly results, gaining 0.77% on Thursday . However, the wave of American technology sell-offs also spread to stocks on the continent, reminding us how intertwined the semiconductor sector and global investment expectations are.

Middle East and metals: geopolitical risk meets industrial demand

In the Persian Gulf, Iran's Revolutionary Guard Corps claimed that four oil tankers had been involved in explosions and fires in the Strait of Hormuz; the claims could not be fully verified independently. British maritime authorities have separately reported ship incidents in the area.

Meanwhile, the Houthis have claimed attacks on key Saudi oil facilities, including Ras Tanura and Abqaiq, while the Riyadh-led coalition has reported missile interceptions. This situation maintains the high risk of supply disruptions and could impact energy costs, transportation, and international inflation.

Industrial metals reacted differently. Copper fell, though remaining elevated at around $14,449 per tonne in official LME quotations, reflecting concerns about industrial growth and technology-related demand.

Tin and nickel also closed lower, with the former down 3.18% , while aluminum held up better. In short, the commodity market isn't moving in one direction: geopolitical risk is offset by more cautious assessments of real demand.

Cryptocurrencies and Trust: The Binance Case

A further blow to sentiment came from the digital market. Binance announced a cyberattack that resulted in the theft of approximately $6.3 billion in cryptocurrency, saying it would cover the losses and initiate measures to freeze and recover the stolen funds.

The case has weighed on Bitcoin's price and revived the issue of the security of centralized depositories. The gravity of the episode goes beyond price fluctuations: it calls into question the operational resilience of the infrastructures that support a growing portion of the digital asset market.

The common message across technology, bonds, and cryptocurrencies is clear: liquidity and confidence cannot be considered infinite . Growth remains present, but investors are once again distinguishing between long-term promises, actual results, and immediate risks. It is this selectivity, rather than a single economic data point, that defines the new market equilibrium.