Global markets have shown cautious interest in reports of potential US and Iran talks, with investors seeing a possible de-escalation in Middle East tensions that could cool oil prices. However, the optimism has not yet translated into a sustained recovery for US equities, according to market commentary by Capital.com.
Capital.com said oil fell as investors reassessed the geopolitical risk premium embedded in crude. The report noted that while lower energy prices typically support risk appetite, sentiment improvements have struggled to lift US stocks over the longer term.
The commentary described pressure building in US markets, pointing to an apparent fourth consecutive session of declines for US equities. It also said the Nasdaq is about 11% below its early-October peak.
AI investment questions remain the central drag
A key factor behind the weak performance, the report added, is continuing concern about the sustainability of AI investment. Capital.com cited what it characterized as underwhelming market reactions to the earnings of major technology companies and said investors are increasingly focused on whether large spending on data centers and AI infrastructure can deliver sufficient returns.
Attention, it said, has been shifting toward measures such as profitability, free cash flow, and ability to monetize AI-related products and services. The report also highlighted that elevated Treasury yields are contributing to downward pressure by reducing the present value of future earnings.
Capital.com framed the combination of stretched valuations, persistently high borrowing costs, and uncertainty over AI monetisation as difficult headwinds for technology stocks.
Precious metals struggle, recovery seen as fragile
Turning to commodities, the commentary said precious metals have had difficulty regaining momentum after what it described as a sharp selloff in October. Silver, it reported, is below $50 and has fallen by about 20% over the past month.
It attributed the weakness to higher real yields, a stronger dollar, and broader market deleveraging. While the report said gold and silver rebounded on Monday as oil prices and Treasury yields eased, it characterized the recovery as fragile.
Capital.com added that geopolitical uncertainty is not automatically translating into steady safe-haven demand when investors are also concerned about restrictive monetary policy. It also noted the risk of liquidation during sharp equity selloffs, when investors may sell more liquid positions to raise cash.
US midterm election adds uncertainty
Looking ahead, Capital.com pointed to US midterm elections on 3 November as an additional source of uncertainty, particularly for the US dollar, Treasury yields, and sectors sensitive to fiscal and regulatory developments.
The report said investors will watch whether election outcomes alter expectations for government spending and borrowing, and how they may affect the administration’s ability to advance its economic agenda.
Still, Capital.com concluded that the immediate challenge for equities remains the combination of elevated yields and growing doubts about AI monetisation. It said a diplomatic breakthrough in the Middle East could further reduce energy prices and ease inflation expectations, but would likely be insufficient to restore confidence in technology stocks unless earnings expectations and valuations begin to stabilize.
