Shares down again as oil stays high; AI earnings in focus

By Shashwat Chauhan and Rocky Swift

Oct 20 (Reuters) - European shares fell and US stocks were set for a lower opening on Tuesday as another rise in crude oil prices kept risk sentiment in check, while investors homed in on results from AI bellwether companies later this week. 

The pan-European STOXX 600 slid 0.7% after dropping close to 1% on Monday, with European semiconductor companies including ASML and ASMI falling almost 3%.

The euro was trading flat against the dollar at $1.12, while yields on 10-year French government bonds inched higher to 4.955% after their biggest one-day jump in about a month, as widespread protests underscored the difficulties the French government faces in reducing its large deficit.

France's cities were calm overnight under curfews imposed after last weekend's scenes of chaos, as protest groups announced a new round of demonstrations next Saturday.

"The weekend's protests have further intensified concerns about French public finances given the size of the austerity measures needed to significantly reduce the budget deficit," said Pia Fromlet, an economist at SEB.

French stocks fell almost 1%, in line with broader market weakness. 

Crude prices resumed their climb, with Brent hitting a five-month high above $111 a barrel. Yemen's Iran-aligned Houthis said on Monday they had attacked Saudi energy, airport and military targets.

The dollar index, which measures the greenback against a basket of currencies, fell 0.1% to 101.89.

The Japanese yen strengthened 0.2% after an auction of long-dated Japanese government bonds drew record demand. Media reports said the Bank of Japan may raise its inflation outlook for the next fiscal year in forecasts due this month. 

In the US, futures on the tech-heavy Nasdaq slipped 0.7%, a day after finding some support following last week's sharp selloff.

EARNINGS AND AI MAJORS IN FOCUS

The spotlight is on corporate earnings. Investors will be looking for evidence that consumers and the broader economy remain resilient but, chiefly, that the vast amount of capital pouring into the AI buildout is showing signs of paying off.

Reflecting some of this nervousness was a near-30% drop in South Korean AI infrastructure company Elice Group on Tuesday, when the stock fell below its initial public offering price in its market debut.

Quarterly earnings are due from SpaceX and Netflix on Tuesday after US markets close, with results from AI heavyweights such as Meta and Tesla scheduled for later in the week.

"Investors are fine with AI being used more. What they're questioning is 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.

With oil prices around five-month highs, gold remained under a touch of pressure, down 0.4% at $4,124.3 an ounce, while in cryptocurrencies, bitcoin fell 0.7% to $81,388.7, and ether eased 0.7% to $2,381.1.

Elsewhere, the Canadian dollar strengthened 0.4% to C$1.405 to the US dollar after residents in Alberta voted to remain part of Canada in the province's first, non-binding referendum on separation.

Finally, a number of European Central Bank officials including Martin Kocher and Olli Rehn speak on Tuesday, as well as Bank of England Monetary Policy Committee member Megan Greene. Their words may help shape investors' expectations for interest rates in the euro zone and Britain.

(Reporting by Shashwat Chauhan in Bengaluru, Rocky Swift in Tokyo and Ankur Banerjee in Singapore; Editing by Shri Navaratnam, Jacqueline Wong, Amanda Cooper, Xevi Fontdegloria and Kevin Liffey)