As of 12:00 Germany time (CEST, UTC+2)
TL;DR: Markets found relief in Microsoft’s results, but not in the bond market. The company’s strong cloud guidance and lower-than-feared capital-spending outlook helped revive confidence in the AI trade after several weeks of selling. At the same time, the Federal Reserve’s divided decision to hold rates steady pushed long-end Treasury yields to fresh multi-year highs, showing that investors remain uncomfortable with inflation risk and Kevin Warsh’s reduced forward guidance.
In Asian Equity Markets trading remained uneven as investors balanced Microsoft’s strong AI signal against continued pressure in South Korea. The KOSPI fell around 1.2 percent and extended its losing streak, showing that the local chip complex has not fully recovered from the recent forced selling and regulatory pressure around leveraged products. Microsoft’s numbers helped the global AI narrative, but they did not immediately repair confidence in every part of the semiconductor supply chain.
In European Equity Markets stocks moved higher as Microsoft’s results lifted technology sentiment and helped offset the pressure from rising bond yields. The pan-European STOXX 600 gained around 0.8 percent, with investors more willing to buy companies that can show AI spending translating into revenue growth. The relief was selective. Europe still faces a more difficult rates backdrop, and companies exposed to financing costs, energy prices or weak discretionary spending remain vulnerable if yields continue rising.
In U.S. Equity Markets futures strengthened after Microsoft delivered one of the clearest positive AI earnings surprises of the season. The company forecast stronger sales and cloud growth than expected, while also signalling that future capital expenditure may be more manageable than investors had feared. That was the key distinction from Alphabet, Tesla and Meta. Markets are not rejecting AI spending entirely. They are rewarding it when companies can show revenue, cash generation and operating leverage alongside the investment.
In Commodities Markets oil eased after several volatile sessions, but energy risk remained part of the inflation backdrop. Brent pulled back from the highs reached during last week’s escalation, helped by renewed diplomatic efforts and Saudi proposals for a maritime coalition around the Red Sea. The decline removed some immediate pressure from consumers and airlines, but the market is still treating Gulf and Red Sea shipping as fragile. Oil no longer needs to be above $100 to keep central banks cautious.
In Currency Markets the yen rallied sharply against the dollar, prompting speculation that Japanese authorities may have intervened after the currency had weakened to four-decade lows. USD/JPY moved toward 159.3, while the dollar index fell below 100. The yen move matters because Japan has been one of the clearest pressure points in the global rates and energy story. A more stable yen would reduce some financial-stability concern, but the underlying pressure from wide rate differentials has not disappeared.
In Bond Markets the long end sold off despite the Fed leaving policy unchanged. The U.S. 30-year Treasury yield reached around 5.24 percent, its highest level since 2007, while the 10-year yield traded near 4.67 percent. Three FOMC members dissented in favour of a rate hike, and Chair Kevin Warsh continued moving away from heavy forward guidance. The message for markets is uncomfortable: the Fed did not hike, but it also did not provide the kind of policy clarity that would cap long-end yields.
The Cross-Asset Read
Thursday gave the market a cleaner answer on AI, but a messier answer on rates.
Microsoft showed what investors are still willing to reward. Strong cloud growth, visible demand and a capex plan that looked less threatening to cash generation were enough to bring buyers back into the sector. That is important after weeks in which strong AI demand from chip suppliers did not stop the selloff.
Meta showed the other side of the trade. Spending without enough near-term proof remains vulnerable. The market is not treating every AI dollar the same anymore.
The bond market is the bigger constraint. A 30-year yield above 5.20 percent changes the valuation backdrop, even when earnings are good. Higher long-end yields raise the discount rate for growth stocks, tighten financial conditions and make the market more dependent on companies delivering real cash flow rather than long-dated promises.
The immediate flag is the U.S. 30-year yield at 5.25 percent and the Nasdaq reaction to Microsoft. If the 30-year breaks above 5.25 percent and technology leadership narrows again, the rally will struggle to broaden. If yields stabilise and more megacaps show Microsoft-style cash discipline, the AI trade can rebuild from a stronger base.
Microsoft proved the market has not given up on AI.
The bond market proved the cost of capital still matters.
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