France concerns weigh on Europe, while Wall Street looks to AI earnings

By Danilo Masoni and Wayne Cole

MILAN/SYDNEY, Oct 19 (Reuters) - European stocks and the euro fell on Monday as unrest in France added to concerns about the country's fiscal outlook, while Wall Street futures rebounded from last week's tech-led selloff ahead of a big week of earnings from AI heavyweights.

Europe's STOXX 600 fell 0.7% by 0837 GMT, while the French blue-chip CAC 40 index dropped over 1% as protests highlighted the government's struggle to rein in its large budget deficit.

The euro fell 0.3% to $1.1203, near last week's 16-month low of $1.1113, as the US dollar index rose 0.2% to 101.9.

A fall in oil prices following President Donald Trump's decision to waive some sanctions on Russia offered some support to broader markets, though investors remained focused on whether massive spending on artificial intelligence will pay 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.    

Wall Street looked set for a firmer open. Nasdaq futures rose 1.1% and S&P 500 futures gained 0.6% after a bruising week in which the Philadelphia Semiconductor Index tumbled 11.4% in its longest losing streak since 2008.

Investors will be hoping Meta will beat forecasts when it announces earnings on Wednesday, alongside semiconductor firms Lam Research and Texas Instruments and Tesla. Results from SpaceX are due Tuesday.

Meta is one of five AI hyperscalers that combined are expected to increase their capital spending to about $1.2 trillion next year, according to Goldman Sachs.

Overall US earnings are still expected to rise about 30%, largely driven by the technology sector.    

RISKS IN VIEW    

Trump said a final decision on the Russia sanctions waiver had not been made, while Secretary of State Marco Rubio said the president would take up to 60 days to assess the impact of such a move.    

Meanwhile, Iran reported another tanker had hit a mine in the Strait of Hormuz, leaving investors weighing whether higher energy costs could feed through to inflation and growth.

"Until the situation becomes clearer, inflationary pressures will continue to mount, keeping central bankers under pressure and weighing on growth prospects," economists at CIC Market Solutions said in a note.

Geopolitical risks in the Middle East kept investors cautious, helping extend a rally in US bonds, with 10-year Treasury yields down 2.5 basis points (bps) at 5.07%, having just recorded their largest weekly fall in more than eight months. 

In Europe, however, concerns over France's fiscal outlook kept pressure on sovereign debt. France's 10-year yield was up 7.3 bps at 4.857%, while safer German 10-year yields rose 1.6 bps to 3.425%.

Oil prices remained under pressure, with Brent futures falling 1.8% to $104 a barrel after hitting their highest level in five months on Friday. US crude lost 1.9% to $99.4 a barrel. [O/R]    

CHINA GROWTH BEATS EXPECTATIONS

Earlier in Asia, shares were mixed. Japan's Nikkei fell 0.6%. South Korea's gained around 1.8%, while Taiwan's fell 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.01%.

Chinese blue chips edged up 0.1% after data showed the economy expanded 4.5% in the third quarter, slightly above forecasts. Retail sales also topped expectations with a 1.1% rise in September, while industrial output growth matched forecasts at 5.5%.

China's yuan firmed to its strongest level against the US dollar since June 2022 at 6.6815.

Jakarta's equity benchmark fell 3.6% to fresh lows, reeling from index provider MSCI saying it was considering shifting Indonesia to "standalone" status from its current "emerging markets" classification. 

Elsewhere, gold gained 0.3% to $4,183 an ounce as lower bond yields boosted demand for non-yielding assets, while bitcoin rose 2.1% to trade back above $82,000.  

(Reporting by Danilo Masoni and Wayne Cole; Editing by Stephen Coates, Kevin Buckland and Xevi Fontdegloria)