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The week in Global Markets
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The week’s AI retreat widened from chip stocks to software, broader equity indexes, data-center debt and IPO valuations. Investors increasingly distinguished companies by earnings and financing strength rather than rewarding AI exposure indiscriminately.
Hot US inflation initially revived fears of prolonged tightening, while rising oil prices later raised the risk of a stagflationary shock. Mixed Federal Reserve signals then weakened some hike bets, leaving rate-sensitive assets exposed to both inflation and growth risks.
India moved from tighter currency restrictions and higher bond yields to direct intervention and a large liquidity infusion as foreign selling and oil costs pressured the rupee. The defense supported the currency temporarily but depleted reserves, disrupted market pricing and left further weakness possible.
Warnings about broadening deficits became more concrete as the US fiscal gap approached $2 trillion and net interest costs reached $1.05 trillion. Rising debt-service burdens are increasingly limiting governments’ ability to absorb future shocks.
Higher yields initially drew investors back into government bond funds, but weakening technology shares later restored Treasuries’ haven appeal. Heavy bill issuance and leveraged positions kept funding and bond-market volatility risks elevated despite calmer repo markets.
MSCI’s warnings over market access turned Indonesia’s foreign selling into a potential benchmark-driven capital-flight event. By week’s end, stocks had fallen to a six-year low, with further pressure on the rupiah and funding conditions.
France’s rising borrowing costs and political unrest turned fiscal credibility into a wider euro-area confidence concern. The pressure threatened to test the region’s refinancing defenses and weighed on the euro alongside broader security risks.
China’s exports accelerated, with AI-related shipments providing a major lift and pushing the trade surplus toward a record. Higher oil costs weakened the benefit while the export surge increased the risk of renewed trade tensions.
Day’s Recap