US futures rebound as AI earnings test looms; France pressures Europe

Wall Street futures rose ‌on Monday ​as oil prices fell and tech shares rebounded ahead of a big week for AI earnings, though concerns about France's fiscal outlookweighedon European assets. Nasdaq futures climbed 1%, recovering some ground after a bruising week that saw the Philadelphia Semiconductor Index post its longest losing streak since 2008.

S&P 500 futures ‌rose 0.4%, while lower oil prices and safe-haven demand helped support Treasuries after a recent bond selloff unsettled technology stocks and intensified scrutiny of the AI sector's massive funding needs. With results due from Meta on Wednesday, alongside those from Tesla and chipmakers Lam Research and Texas Instruments, markets will be watching for signs that massive AI spending ultimately pays off.

"Investors will want to hear more than another ambitious spending plan: they ‌will want evidence that AI is helping generate enough revenue and profit to justify the bill," said Ipek Ozkardeskaya, senior analyst at Swissquote. Meta is one of five AI hyperscalers expected to increase combined ‌capital expenditure to about $1.2 trillion next year, according to Goldman Sachs.

In the second quarter, the Facebook owner reported a sharp decline in free cash flow as spending accelerated, underscoring the financial strain of the costly AI infrastructure buildout. Results from SpaceX are also due on Tuesday. Overall, US earnings are still expected to rise about 30%, largely driven by the technology sector.

Benchmark 10-year Treasury yields fell 2.3 basis points to 5.075%, extending a rally after posting their biggest weekly decline in more than eight ⁠months. FRENCH STRESS WEIGHS ​ON EUROPE

In Europe, the picture was markedly different. ⁠While the region's technology stocks tracked Nasdaq futures higher, concerns over France's fiscal outlook weighed on equities, the euro and government bonds. Paris blue chips fell 1.5%, moving back towards the six-month low touched earlier this month, while the pan-European STOXX 600 slipped 1%. ⁠Banking stocks, seen as particularly vulnerable to sovereign stress, dropped 2.1%.

Widespread weekend unrest in the euro zone's second-largest economy underscored the challenge facing the French government as it seeks to reduce its large budget deficit ahead of ​next year's presidential elections. That pushed French bond yields higher and widened their spread over safer German equivalents. France's 10-year bond yield rose 9 bps to 4.875%, while Germany's benchmark yields rose 1.8 ⁠bps at 3.428%.

"There is clearly political risk and that is going to mean near-term volatility," said Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management. He also noted, however, that roughly 80% of revenues by French stocks come from overseas, limiting the direct ⁠impact ​of political developments on corporate fundamentals.

The euro fell 0.16% to $1.1223, not too far from last week's 16-month low of $1.1113, while the dollar index rose roughly 0.1% to 101.9. OIL RETREATS FROM FIVE-MONTH HIGHS

A fall in oil prices following US President Donald Trump's decision to waive some sanctions on Russia provided support for broader markets, though investors stayed focused on the potential for conflicts in the Middle East and ⁠Ukraine to alter the global supply-demand balance. Brent crude futures fell 1.3%, to $108.4 after settling at a five-month high on Friday, while US crude lost 0.3% to $101.15 a barrel.

Earlier in Asia, trading was mixed. ⁠Japan's Nikkei fell 0.6%, while MSCI's broadest index of ⁠Asia-Pacific shares outside Japan edged up 0.1%. Chinese blue chips added 0.1% after data showed the economy expanded 4.5% in the third quarter, slightly ahead of expectations.

China's yuan strengthened to 6.6806 per dollar, its strongest level since June 2022. Gold rose around 0.1% to $4,168 an ounce as lower bond yields supported demand for ‌non-yielding assets, while bitcoin gained 1.6% to ‌climb back above $82,000.