US bond yields hit new highs; AI still grappling with growth-safety tension

Stock markets remained muted as US government bond yields continued to push higher, with the yield on 30-year bonds hitting a 24-year high and Barclays Capital analysts picking the return investors demand could climb to 6% – its highest level since 2000 – as a hot American economy and concerns about federal government debt spur the bond selloff.

The artificial intelligence sector was busy as Reuters obtained a copy of Anthropic’s prospectus outlining details of its growth plans and OpenAI’s latest funding round values the ChatGPT developer US$1.4 trillion, while firms continue to balance those ambitions against the need to do so safely.

The heightened market volatility prompted smart ring maker Oura to delay its planned initial public offering, while AI data centre company Firmus Technologies pushed out its planned ASX listing after a new deal with Meta Platforms prompted a tweak to its earnings forecast.

And earnings from Warehouse Group and ANZ’s monthly gauge of business confidence will provide the latest update on the health of New Zealand’s domestic economy, with local investors preparing to square up their positions with the S&P/NZX 50 index on track for a modestly positive September quarter with one trading session to go.

Millennial rates

The yield on US 30-year treasuries rose 5 basis points to 5.6% at 7am in Auckland as the global bond selloff continued, with 10-year treasury yields up 6 basis points at 5.27%, widening the gap with New Zealand’s equivalent at 5.13%.

Bond yields moved out of lockstep with oil prices in overnight trading, with Brent crude futures down 1.9% at US$103.33 a barrel as Saudi Arabia’s East-West pipeline returned to operating at half-capacity and as the US Department of Energy said it would further tap its strategic reserve.

“Markets are trading cautiously, with US treasury yields reaching new milestones and weighing on US equities,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The rise in rates caps off a poor September, with two-year and five-year rates recording the largest moves, up 60 basis points with one trading day still remaining.”

Stock markets on both sides of the Atlantic were generally weaker, with the Dow Jones Industrial Average down 0.4% in late trading, with Walmart, Apple and Johnson & Johnson at the bottom of the leaderboard. The S&P 500 slipped 0.3% and the Nasdaq Composite slipped 0.2%.

Tourism operators provided mixed signals as Vail Resorts dipped on softer earnings, while cruise operator Carnival rallied after reporting strong demand in the third quarter.

In Europe, the UK’s FTSE 100 and France’s CAC 40 both fell 0.5%, while Germany’s DAX edged up 0.1%.

Swiss chocolate maker Lindt tumbled 8.7% after cutting its sales forecast for a second time this year, while Hapag-Lloyd climbed 9.7% as it raised its annual earnings guidance on strong demand.

AI continued to grapple with demands for increased safety against the growth ambitions of the majors, with the New York Times reporting OpenAI ignored staff who warned models weren’t being monitored properly, while Reuters reported that Anthropic’s prospectus outlined how it would create an entity for its founders to keep control of the Claude developer to act as stewards of the company.

AI leaders were meeting with US President Donald Trump to discuss growing concerns about the threat posed by the technology. Trump earlier said he didn’t want to work with China on governing AI technology, saying it would make it harder for US firms to build better products than their rivals.

Hungry for money

Meanwhile, Bloomberg reported OpenAI was seeking to raise US$30 billion at a valuation of US$1.4 trillion, having delayed plans to go public. Separately, the ChatGPT maker announced new always-on agents called Dots to compete with Meta’s Muse.

And the Financial Times reported that Nvidia has discussed spreading the risk of lending against its chips with insurers, to encourage capital to flow to its customers that don’t have the enormous balance sheets of big tech companies.

The heightened market volatility prompted US smart ring maker Oura to postpone a planned IPO that was expected to value the firm above the US$11 billion it achieved in a fund round last year, while Firmus pushed its ASX listing to later in October after securing contracts with Meta that were expected to lift its US$5 billion of earnings by about 15%.

The soft tone in markets is set to continue into the antipodes, with futures pointing to a 0.4% decline for the S&P/ASX 200 index in the final trading day of the quarter. The New Zealand dollar fell to 56.33 US cents at 7am from 56.63 cents yesterday.

The NZX 50 has gained 0.5% so far this quarter, with one trading session to go, with investors expecting heavy trading end the three-month period.

Warehouse Group is due to report its annual result today, with the retailer signalling improved margins from its Noel Leeming and Warehouse Stationery arms.

Meanwhile, the monthly ANZ business outlook survey is also due, while NZX-listed minnows BeingAI and Iperion are holding their annual meetings.

Heartland Group Holdings shareholders will vote on whether to approve a merger of its bank with TSB Bank, which is currently being probed by the Reserve Bank.

Fonterra Cooperative Group and the Shareholders’ Fund shed rights to their dividends today.

Reporting by Paul McBeth. Image from Austin Distel on Unsplash