By Daniela Hathorn, Senior Market Analyst at Capital.com
Global markets are starting the week on a firmer footing, with Asian equities staging a strong recovery from last week’s sharp selloff, led by renewed buying in semiconductor stocks. The improvement has carried through to US futures, with the S&P 500 and Nasdaq pointing to gains of around 0.5–0.6%. However, the rebound looks more like a tentative return of risk appetite than a convincing reversal of the recent downtrend. Investors are taking advantage of lower valuations, but concerns over AI profitability, elevated borrowing costs and potential regulatory changes following the US midterms remain unresolved.
One development that could complicate the recovery is the controversy surrounding Nvidia CEO Jensen Huang. The company has launched an independent investigation following reports that Huang may have been targeted by a foreign intelligence operation, raising questions about corporate governance and possible national security implications. Nvidia’s board has stressed that it has no reason to believe company secrets were compromised and continues to express confidence in Huang’s leadership. Nevertheless, the shares fell more than 3% in out-of-hours trading, underlining the potential reputational damage. Given Huang’s central role in Nvidia’s success and in the wider AI investment narrative, even speculation about leadership uncertainty could unsettle investors. That said, there is currently no confirmed indication that he will step down, and the controversy does not necessarily alter the company’s underlying demand outlook.
The bigger challenge for equities remains the combination of AI valuation concerns and the prospect of further Federal Reserve tightening. Friday’s stronger-than-expected US employment report showed 165,000 new jobs, reinforcing the view that the economy remains resilient despite elevated interest rates. This has pushed the probability of a December rate hike towards 80%, while Tuesday’s US CPI report could provide the next key catalyst. A hotter inflation reading could force investors to price in additional tightening into 2027, putting renewed upward pressure on Treasury yields and potentially undermining the technology rebound. Conversely, softer inflation could offer some relief, particularly if it allows yields to stabilise.
Elsewhere, oil prices have retreated below $100 a barrel as hopes of progress in US-Iran negotiations erode the geopolitical risk premium, offering some support to inflation expectations and energy-importing economies. Gold has also recovered towards $4,120, suggesting that demand for defensive assets has not disappeared despite the improvement in equities.
