GLOBAL MARKETS-Tech giants' spending spooks investors as bonds rally

Tech shares slumped on Friday and US bonds surged ‌toward ​their biggest monthly gain in nearly three years, as investors scurried to safety due to worries that huge and rising AI spending may not deliver sufficient returns. Futures trading pointed to falls on Wall Street later in the session, including a more than 2% drop in the tech-heavy Nasdaq 100. That ‌came alongside an out-of-hours plunge of 23% in Intel shares and a drop of 7% in Amazon as their results showed they burned through cash.

Shares in Google parent Alphabet fell 12.6% on Wall Street on Thursday and slid a little further after hours, to wipe out a stunning $500 billion in market value, as massive AI spending turned the company's cash flow negative. European stocks opened down 0.2% on Friday, as the relative lack ‌of big tech stocks helped limit losses. There were falls earlier in Asia led by chipmakers.

Investors are worried about the returns they can expect to make on the massive capital spending ‌needed for the AI buildout and what effect it could have on consumers if price hikes squeeze global demand for devices like smartphones and PCs. Anthropic's potentially record-breaking IPO could prove the next big test of sentiment. "The next key milestone will be the Anthropic IPO, to see how that lands. If it's a poor listing, I think that could signal a bit of weakness going forward," said Jason Da Silva, co-chief investment officer at Arbuthnot Latham.

Nerves were also frayed by a potentially record-breaking hack at ⁠Binance, the ​world's biggest cryptocurrency exchange, which drove down bitcoin and other ⁠cryptocurrency prices. The world's biggest cryptocurrency, bitcoin, hit a six-week low before cutting losses to trade 1.1% lower at $77,876.

"I suspect the negative price action still has some way to go," said Geoffrey Kendrick, head of digital assets research at Standard Chartered. "Only after ⁠assets are unfrozen and more detail of the hack emerges will we find a new base." In commodities, oil prices rose about 2% on Friday and were poised for a fourth monthly gain, as an attack on a ​tanker in the Strait of Hormuz waterway highlighted continuing supply risks from the US-Israeli war on Iran.

NO SURPRISE FROM BOJ The Bank of Japan left interest rates on hold, which was expected ⁠and did not trigger major currency or bond moves, although in a surprise development the central bank unveiled plans to sharply accelerate exchange-traded fund sales next year.

"While this may initially spook markets, I actually think this is a positive development since the BOJ feels ⁠confident enough ​with the economy and market," said David Chao, global market strategist for Asia-Pacific at Invesco. The central bank declared victory in a nearly 14-year battle to hit its price target and signalled vigilance against inflation risks, suggesting the next rate hike could come as soon as December.

Tech sector jitters have helped push a rush to bonds, further spurred by the Federal Reserve's decision on Wednesday to keep US ⁠interest rates on hold, with no firm projection of when it might hike next. Benchmark 10-year US Treasury yields fell around 7 basis points on Friday to 4.92% and were on track for ⁠their largest one-month drop since December 2023. Yields fall when bond ⁠prices rise.

The risk-averse mood strengthened haven currencies such as the yen and Swiss franc, with the yen slightly higher at 157.30 per dollar and the franc at 0.821 to the dollar and not far from a one-month high. The euro inched up 0.1% to $1.1194 but was set for a drop of ‌over 1% in October, its ‌second straight monthly decline.