US Stock Futures Rise Ahead of AI Earnings as French Political Crisis Weighs on Europe

US stock futures rose on Monday as investors prepared for major technology earnings reports, while falling oil prices provided additional support to financial markets.

However, political unrest and concerns over France’s fiscal outlook weighed on European stocks and the euro.

According to Reuters, Nasdaq futures gained one per cent, recovering some of the losses recorded last week when the Philadelphia Semiconductor Index experienced its longest losing streak since 2008. Futures tied to the S&P 500 also advanced by 0.4 per cent.

Investors are focusing on earnings reports from major technology companies to assess whether their substantial investments in artificial intelligence (AI) will generate sufficient revenue and profits to justify the rising costs.

Meta Platforms is expected to release its results on Wednesday, alongside Tesla and chipmakers Lam Research and Texas Instruments. SpaceX is also scheduled to report its results on Tuesday.

The earnings announcements come amid growing scrutiny of spending on AI infrastructure, with investors seeking evidence that the technology is generating sustainable financial returns.

Ipek Ozkardeskaya, a senior analyst at Swissquote, said investors would be looking beyond companies’ spending plans to determine whether their AI investments were translating into stronger revenues and profits.

According to Goldman Sachs, five major AI companies are expected to increase their combined capital expenditure to approximately $1.2 trillion next year.

Meta, the parent company of Facebook, reported a sharp decline in free cash flow in the second quarter as its spending increased, highlighting the financial demands associated with expanding AI infrastructure.

Despite concerns over rising expenditure, US corporate earnings are expected to grow by approximately 30 per cent, largely driven by the technology sector.

Meanwhile, the yield on benchmark 10-year US Treasury bonds fell by 2.3 basis points to 5.075 per cent, extending a recovery following its biggest weekly decline in more than eight months.

In Europe, stocks declined as political unrest and concerns over France’s public finances heightened investor anxiety.

France’s CAC 40 index fell by 1.5 per cent, while the pan-European STOXX 600 declined by one per cent.

European banking stocks dropped by 2.1 per cent amid concerns about the potential impact of sovereign debt pressures.

The unrest in France, the eurozone’s second-largest economy, has increased uncertainty over the government’s efforts to reduce its substantial budget deficit ahead of next year’s presidential election.

France’s 10-year government bond yield rose by nine basis points to 4.875 per cent, while Germany’s equivalent yield increased by 1.8 basis points to 3.428 per cent.

The difference between the two countries’ borrowing costs widened, reflecting growing concerns about France’s fiscal position.

Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, said political risks were likely to generate volatility in the near term.

However, he noted that approximately 80 per cent of revenues generated by French-listed companies came from overseas, potentially limiting the direct impact of domestic political developments on their businesses.

The euro fell by 0.16 per cent to $1.1223, remaining close to the 16-month low of $1.1113 recorded the previous week. The US dollar index rose by approximately 0.1 per cent to 101.9.

Meanwhile, oil prices declined following US President Donald Trump’s decision to waive some sanctions on Russia.

Brent crude futures fell by 1.3 per cent to $108.40 per barrel after settling at a five-month high on Friday. US crude futures dropped by 0.3 per cent to $101.15 per barrel.

Despite the decline, investors remained concerned that conflicts in the Middle East and Ukraine could disrupt global oil supplies and affect the balance between production and demand.

In Asian markets, Japan’s Nikkei index fell by 0.6 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan edged up by 0.1 per cent.

Chinese blue-chip stocks gained 0.1 per cent after data showed that China’s economy grew by 4.5 per cent in the third quarter, slightly exceeding market expectations.

The Chinese yuan strengthened to 6.6806 against the US dollar, its highest level since June 2022.

Gold prices rose by approximately 0.1 per cent to $4,168 per ounce as lower bond yields supported demand for the precious metal. Bitcoin also gained 1.6 per cent, climbing above $82,000.

Global investors are expected to continue monitoring technology earnings, developments in France, oil prices and geopolitical tensions for indications of the direction of financial markets in the coming days.

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