Morning Bid: Korean Canary in the AI Coalmine

A look at the day ahead in European and global markets from Rocky Swift

A rocky start for a South Korean startup cast a shadow over highly anticipated announcements by AI hyperscalers this week.

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AI infrastructure company Elice Group (0158S0.KQ) sank nearly 30% below its initial public offering price on Tuesday, while the tech-heavy KOSPI (.KS11)gauge ‌lost nearly 4%, showing shaky sentiment after a market selloff that derailed some deals.

Along with quarterly results, the massive spending plans of the major AI players are increasingly in focus. Facebook operator Meta Platforms (META.O), due to report on Wednesday, is one of five AI hyperscalers expected to increase combined capital expenditure to about $1.2 trillion next year, according to Goldman Sachs.

As infrastructure plans grow ever larger and borrowing costs soar, investors are questioning "whether every dollar of AI ⁠capex earns more than it costs to finance," said Ninghui Liu, head of investment strategy and research for APAC at State Street Investment Management.

On the docket today, Netflix (NFLX.O) is expected to report slowing revenue growth in the third quarter, while SpaceX (SPCX.O) is forecast to report $12.74 billion in quarterly revenue. General Motors (GM.N), Hasbro (HAS.O), Halliburton (HAL.N), and 3M (MMM.N) are among the more-established names due to report on Tuesday.

Oil prices resumed their climb on Tuesday as it seemed unclear whether US President Donald Trump would go through with a waiver of sanctions on some Russian energy exports, while fresh violence in the Middle East heightened the risk of supply disruptions.

Inflationary pressures from elevated oil prices have put most major central banks on a tightening bias, though with a ‌careful ⁠eye on whether economies are resilient enough to absorb higher interest rates.

Recent comments from Federal Reserve officials, including Chair Kevin Warsh, suggest policymakers are in no rush to hike rates again.

European Central Bank policymaker Martin Kocher is due to speak later on Tuesday, as well as ECB policymaker and Finnish central bank governor Olli Rehn. Bank of England Monetary Policy Committee member Megan Greene will deliver ⁠a speech at the London School of Economics.

In the economic data calendar, the US Census Bureau is expected to say housing starts rose to 1.305 million in September from 1.275 million in August, while building permits may have increased to 1.395 million from 1.403 million.

In ⁠early European trades, the pan-region Euro Stoxx 50 futures were down 0.63%, German DAX futures sank 0.39% and FTSE futures were down 0.48%. US stock futures, the S&P 500 e-minis , were up 0.1% at 7,742.

Key developments that could influence markets ⁠on Tuesday:

- Earnings: Deutsche Boerse AG, Netflix, RTX, SpaceX, General Electric, 3M, General Motors, Hasbro

- Germany Producer Prices for September

- United Kingdom jobs data for August

- Euro zone current account (August)

- ZEW Surveys for euro zone, Germany

- Auctions: Germany – Reopening of 3-year and 27-year government debt; United Kingdom – Reopening of 10-year government debt

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Source: Reuters