EMEA Morning Briefing: Markets Sell Off on AI Jitters, Rate-Hike Fears

MARKET WRAPS

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Eurozone industrial production; U.K. trade, GDP, industrial production; trading updates for Ericsson, Pernod Ricard, EQT, Nordea Bank, Lagardere, Entain, Travis Perkins, Mondi, British Land

Opening Call:

European stock futures were lower after Asia stocks sold off. U.S. Treasurys were lower, the dollar fell. Gold rose and oil fell.

Equities:

European equity futures fell, as stocks sold off across the world on a hotter-than-expected U.S. CPI report. A tech selloff that had been brewing had also gathered momentum overnight.

Investors who have grown wary of some names in the AI trade-amid concerns over everything from the threat of Chinese competition to rising borrowing costs-unloaded stocks. As that downturn snowballed, it sparked a flight back to safer assets, including Treasurys, driving bond yields back lower again.

While markets remain in reach of records even after the day's action, the chaos underscored how sensitive Wall Street is to the twin anxieties of higher-for-longer interest rates and an economy dependent on a single sector.

"The AI stuff is kind of just dominating everything," said Ryan Jungk, a portfolio manager at Newfleet Asset Management. "It's kind of a whirlwind."

Forex:

The U.S. dollar weakened amid falling U.S. Treasury yields that tend to undermine the allure of U.S. fixed-income assets and demand for the greenback, and the dollar may be further supported by higher prospects of Fed rate hikes.

U.S. data released overnight showed core inflation was 0.3% on month in September, above consensus estimate for a 0.2% on month increase, said CBA's Samara Hammoud.

"Markets are now pricing a 34% chance of an October interest rate hike, compared with 20% before the data," said the international economist.

Bonds:

The yield on U.S. Treasurys were lower after a surprisingly high inflation report revived the global bonds selloff.

Investors reacted by dumping government bonds, sending yields higher. Market pricing of an interest rate increase by the Federal Reserve this month moved alongside yields and was recently at 34%, according to CME's FedWatch tool.

Investors are also bracing for an extended period of above-target inflation leading to steep borrowing costs. "It seems difficult to believe that inflation is going to disappear overnight," said Burke Koonce, chief investment strategist at Trust Company of the South.

"So, that would lead you to believe that rates are going to be higher for longer."

Energy:

Oil prices fell, on possible position adjustments after rising overnight but near term losses are likely to be limited by ongoing Middle East tensions.

Yemen's Houthi militants struck a building at the headquarters of Saudi Arabia's state oil giant in the eastern city of Dhahran, the WSJ reported, citing people familiar with the matter.

"Hostilities intensified in the Middle East, threatening further supply disruptions," ANZ Research analysts said.

Also, "attacks on oil tankers in the Persian Gulf continued unabated," they added.

Metals:

Gold prices were higher on a possible technical correction, after front-month gold futures settled lower overnight.

Traders are waiting for Fed Chairman Kevin Warsh's scheduled speech on Friday, said Kudo.com's Konstantinos Chrysikos.

The probability of an October rate increase priced in the futures markets jumped after the latest U.S. CPI data showed a firmer-than-expected reading for underlying inflation--higher rates typically diminish the allure of the non-interest-bearing precious metal.

Iron ore prices fell amid unattractive steel mills margins and falling steel output.

Meanwhile, China's imports of iron ore continue to rise on year, keeping the domestic supply ample, Nanhua Futures said.

As Chinese manufacturing sector's steel demand slightly recovers, 3Q may be the weakest season in terms of steel use, it said.

Both Chinese and overseas steel demand may be concentrated in the later part of the year, it added.

TODAY'S TOP HEADLINES

AI Jitters and Rate-Hike Fears Combine for Worst Day for Stocks Since July

A placid stock market is suddenly facing threats from all directions.

Worries about interest rates spurred by a surprisingly hot inflation reading collided with growing jitters in the technology sector on Wednesday. And a session that began with rising bond yields and expectations of an October rate increase culminated with the stock market's worst day in months.

A Swiss Banking Giant Thinks the Unthinkable: Moving Out of Switzerland

Executives at UBS, Switzerland's last remaining flagship global bank, are preparing for a once unimaginable move-ditching its Swiss home base.

People at the bank and their advisers are mapping out contingency plans should Swiss lawmakers proceed with tougher capital requirements under the country's too-big-to-fail banking laws. The measures are a response to UBS having to rescue Credit Suisse three years ago, according to people familiar with the bank's efforts.

AI Companies Play Cat-and-Mouse With Secret-Stealing Spies

At a San Francisco playground, a stranger tried to befriend an OpenAI employee who was there with their child. The stranger also regularly showed up with a child, and, in the process of making small talk, asked the OpenAI employee questions about their work. It was no idle curiosity: The stranger was a spy.

That is one of the scenarios employees of the artificial intelligence company have been presented with in attempts to raise their vigilance against attempts to steal corporate secrets-and that was before federal authorities arrested an employee for planting a listening device.

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Expected Major Events for Thursday 04:30/NED: Sep Unemployment

06:00/ROM: Aug Industrial production

06:00/NOR: Sep External trade in goods

06:00/UK: Aug Index of production

06:00/UK: Aug UK trade

06:00/UK: Aug Index of services

06:00/UK: Aug Monthly GDP estimates

06:30/SWI: Sep Import Price Index

06:30/SWI: Sep PPI

06:45/FRA: Sep CPI

07:00/SVK: Sep CPI

07:00/SVK: Sep Core & net inflation development

09:00/EU: Aug Industrial Production

09:00/CRO: Sep CPI

10:00/FRA: Aug OECD Harmonised Unemployment Rates

10:00/FRA: 2Q OECD Quarterly Labour Market Situation

11:30/UK: Sep NIESR Monthly GDP Tracker

15:59/UKR: Aug POSTPONED: Trade

23:01/UK: Sep Scottish Retail Sales Monitor

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

October 15, 2026 00:17 ET (04:17 GMT)