AI spending doubts and Brent above $111 drag Nasdaq futures 1.6% lower

• US: Last night's gains are being reversed before the open. S&P 500 futures are trading 0.93% lower at 7,727.5 and Nasdaq 100 futures are down 1.6%. The S&P 500 cash index closed on Wednesday up 0.58% at 7,757.17, the Nasdaq Composite rose 1.05% and the Dow gained 0.69% to 52,856.09.
• Asia had a heavy session. The Kospi closed 3.52% lower, the Hang Seng lost 3.03%, the Nikkei 225 fell 2.65% to 62,907.84 and Taiwan dropped 1.81%. The Shanghai Composite ended down 1.48%.
• Europe is weaker than at the morning note but has steadied off its lows. The Euro Stoxx 50 is down 1.3% and the CAC 40 1.01%, the DAX has lost 0.57% and the FTSE 100 is only 0.14% lower.

The main driver is a loss of patience with AI spending. Meta beat on revenue but raised its annual capital-spending range to $135–145 billion. Its free cash flow turned negative, and it took a $9.89 billion legal charge. Tesla moved the other way, cutting 2026 capex to about $20 billion from more than $25 billion, and it lowered its long-term sales target. Both stocks are down in pre-market trading. The market is now punishing heavy spending that has not yet produced returns, but it is also reading lower spending as weaker demand for the chips and memory the spending buys. Lam Research's soft forecast has added to the selling in chipmakers, and IBM's chief executive said some customers question whether AI investments pay off. That is why the Nasdaq is falling further than the Dow. It also explains Asia's tech-heavy losses, from Seoul to Taipei, and the 2.8–3.6% falls in Europe's chip names.

The second driver is oil. Reports that the US and Israel may resume strikes on Iran, together with Houthi attacks on Saudi Arabia, have lifted Brent 2.74% to $111.77. Expensive energy is a tax on growth and keeps inflation risk alive, which hurts Europe most of all.

Europe also has its own problems. French political unrest and budget paralysis are weighing on Paris. Barclays' third-quarter pre-tax profit of £2.3 billion missed estimates of £2.4 billion, which knocked the banking sector, and Hermès fell after soft sales.

The mood is defensive but not panicked. The VIX is up 7.79% at 17.98, which is elevated but nowhere near stress levels. The clearest flight to safety is in bonds: the 10-year Treasury yield is down 10.6bp at 5.04% and the 5-year 11.1bp at 4.861%. Gold has not benefited, falling 1.26% to $4,097.60, and bitcoin is down 2.89%. The dollar index is flat, although the yen has firmed 0.73% against it. Asian selling was broad: PrimerIQ's breadth count shows 9,565 decliners against 2,874 advancers. Wednesday's US rally was narrow. Tech rose 1.67% and communication services fell 1.11%, and our US breadth was barely positive at 1.01, so there was little cushion beneath it.

At 08:30 ET, initial jobless claims for the week to 17 October came in at 194,000, below the 200,000 expected and down from a revised 200,000. Continuing claims rose to 1.728 million, a little above the 1.72 million forecast. Taken together, people are rarely being laid off but finding a new job is getting slower, so the jobs market is not cooling quickly. The figures have done little to stem the rally in Treasuries.

Still to come today: the September leading index at 10:00 ET, EIA natural gas storage at 10:30, the Kansas City Fed manufacturing survey at 11:00 and a $26 billion 5-year TIPS auction at 13:00. The Fed is in its blackout period before the 28 October decision, so no Fed officials will be speaking. Friday brings the flash S&P Global PMIs at 09:45 ET.

The pre-market results have been better than the tape. Procter & Gamble earned $2.00 a share against $1.89 expected and is up about 3%. Lockheed Martin beat with $7.97 against $7.49 and raised its full-year outlook, sending the shares up roughly 4%. Honeywell, Union Pacific, Comcast and Blackstone all beat estimates as well, though none of them is moving the wider market.