As of 12:00 Germany time (CEST, UTC+2)
TL;DR: Global markets came under heavy pressure on Thursday as two risks hit at once. Alphabet and Tesla failed to reassure investors that heavy AI spending is translating into enough cash generation, while Brent crude moved above $100 for the first time since May after attacks on Saudi tankers in the Red Sea. Technology shares fell, European borrowing costs rose and the yen returned to 40-year lows as the market repriced both earnings quality and inflation risk.
In Asian Equity Markets stocks struggled as the previous semiconductor rebound lost momentum. Investors were already cautious after several weeks of sharp swings in South Korea, Taiwan and Japan, and the reaction to U.S. megacap earnings gave the region another reason to reduce AI-linked exposure. The issue is no longer whether demand for chips and AI infrastructure exists. The concern is whether the companies funding that infrastructure can keep spending at this pace without putting pressure on free cash flow, margins and valuations.
In European Equity Markets stocks fell as technology weakness and higher energy prices weighed on sentiment. The pan-European STOXX 600 declined around 1.2 percent, while STMicroelectronics dropped sharply after missing earnings expectations. The region is being pulled in two directions. Energy companies benefit from higher crude, but the wider market faces higher input costs, weaker consumer margins and rising borrowing costs. Germany’s 10-year Bund yield moved above 3.2 percent for the first time since 2011, showing that the oil shock is feeding directly into the rates market.
In U.S. Equity Markets Wall Street futures pointed lower after Alphabet and Tesla became the first major megacap earnings tests of the season. Alphabet’s results showed strong underlying demand, but investors focused on higher AI spending and cash burn. Tesla fell after reporting negative free cash flow for the first time in more than two years, reinforcing the market’s concern that expensive growth companies are becoming harder to defend in a higher-rate environment. The broader message from earnings season is that strong revenue is no longer enough if capital spending is rising faster than cash generation.
In Commodities Markets oil became the dominant cross-asset driver. Brent settled above $100 per barrel after attacks on two Saudi tankers in the Red Sea added a second major supply risk alongside the Strait of Hormuz. The move matters because it turns the energy shock from a contained geopolitical premium into a direct inflation problem. Transport, chemicals, airlines and consumer-facing sectors now face renewed margin pressure, while central banks have less room to look through the shock if it persists.
In Currency Markets the dollar strengthened as higher oil and rising yields supported defensive demand. The euro slipped back below $1.14 after the ECB held rates but signalled that inflation risks remain elevated. The yen returned to a 40-year low against the dollar after an earlier lift from Bank of Japan rate speculation faded. Japan remains particularly exposed because higher oil raises the import bill while wide rate differentials continue to favour the dollar. Intervention risk remains high, but the underlying pressure has not gone away.
In Bond Markets yields rose as investors rebuilt the inflation premium. The U.S. 10-year Treasury yield traded around 4.7 percent, its highest level since early 2025, while Europe’s borrowing costs moved to long-term highs. The ECB held rates steady at 2.25 percent, but markets interpreted the tone as hawkish and increased the probability of a September hike. U.S. jobless claims also fell unexpectedly, keeping the labour market firm enough for the Federal Reserve to stay focused on inflation rather than growth support.
The Cross-Asset Read
Thursday was the first clean stress test of the AI earnings story under a genuine energy shock.
Alphabet and Tesla did not show that demand has disappeared. Alphabet still has strong underlying businesses, and Tesla still has a long growth narrative. The problem is cash flow. Investors are becoming less willing to reward companies for future AI optionality when current spending is absorbing more capital and oil is pushing discount rates higher.
That is the change in market behaviour. Earlier this year, high capex was treated as proof of ambition. Now it is being tested against cash generation, margins and balance-sheet discipline.
Oil made the reaction sharper. Brent above $100 forces the inflation question back into every asset class. It raises the cost base for companies, pressures consumers and gives central banks less flexibility. The result is a more difficult backdrop for long-duration growth shares just as the market is questioning whether AI spending can pay for itself quickly enough.
The immediate flag is Brent at $100 and the U.S. 10-year yield at 4.75 percent. If Brent holds above $100 and the 10-year moves through 4.75 percent, the pressure on growth valuations is likely to broaden. If oil retreats quickly and yields stay below that level, earnings still have room to stabilise the market.
The market still wants exposure to AI.
It no longer wants to ignore the bill.
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