Global stock markets struggle on Nvidia whiplash, dollar climbs

Global stocks gave up early gains to trade lower on ‌Friday after a turbulent week dominated by revelations of extramarital affairs involving Nvidia CEO Jensen Huang that culminated in his resignation, in a blow to the global ​AI boom he helped ⁠advance.

US Treasury yields climbed, with the 2-year yield hitting a one-month high, lifting the dollar as investors weighed the prospect of ‌an outsized 50-basis-point rate hike by the Federal Reserve ‌next month.

Huang stepped down on Thursday after reports of the affairs, including one involving a suspected Chinese spy, which plunged the chipmaker into crisis and sent shockwaves through the AI industry.

His exit could have far-reaching consequences for US chip export policy and the broader AI industry and supply chain, given Huang's push to preserve access to the Chinese market as well as ‌his close ties with US President Donald Trump.

"Jensen has obviously been a singular force in many ways so the impact will likely be felt far and wide," ⁠said UBS analyst Timothy Arcuri.

"The company has become a key source of funds for a host of AI industry participants including neo-clouds, LLM developers, ecosystem partners, and suppliers, and we have always seen Jensen as a key driving force for this effort. Even if a new leader ultimately maintains a similar approach, there is likely to be some 'pause' in the company's willingness and ability to continue pursuing these deals in the near term."

Shares of Nvidia's customers, like South Korea's Naver , fell more than 5%.

In China and Hong Kong, AI model stocks Z.AI Co and MiniMax Group fell sharply on worries of reduced access to advanced AI chips, while data centre suppliers Zhongji Innolight and Eoptolink ​Technology, whose businesses are heavily reliant on US markets, slumped.

Jon Zauderer, Citi's head of specialist sales and a TMT specialist, said competitors such as AMD, ‌Arista and Broadcom could benefit from the Nvidia fallout.

MSCI's broadest index of Asia-Pacific shares outside Japan reversed early gains to trade 0.42% lower. South Korea's Kospi similarly slid 0.85% while Japan's Nikkei added 0.55%.

Nasdaq futures and S&P 500 futures fell 0.3% and 0.1%, respectively. EUROSTOXX 50 futures and DAX futures lost more than 0.4% each, while FTSE futures eased 0.3%.

US Senate Banking ⁠Committee Chairman Tim Scott sent letters on Thursday to Commerce Secretary Howard Lutnick and Huang, asking them to testify over recent developments at Nvidia.

Concerns over the AI outlook also spilled into metals, with copper prices on track for a weekly loss on fears of weaker demand, while shares of Australian-listed miner Capstone Copper Corp fell more than 5% on Friday.

The 2-year US ‌Treasury yield peaked at 4.8920% in the early Asian session, while the benchmark 10-year yield rose to a three-week high of 5.1433%.

Investors now see a 13% chance ‌of a jumbo 50bp Fed hike in December, up from zero a week ago, according to the CME FedWatch tool.

"Right now, the US Fed has three hikes priced in for effectively the next 12 months... The (most recent) CPI print obviously was a bit hotter than expected. If those kinds of prints continue to happen, we can definitely see the Fed hiking three more times. ‌It's very within the ‌realms of possibility," said Manusha Samaraweera, fixed income investment director at Capital Group.

The increasingly hawkish ⁠Fed expectations in turn boosted the dollar, which was on track for a weekly gain of 0.9%, its biggest in more than a ‌month.

The strength in the greenback, meanwhile, weighed on the yen, which languished close to the key 160 per dollar level on Friday, leaving traders on alert for any intervention from Tokyo.

The Federal Reserve Bank of New York said on Thursday it bought 79.4 billion yen ($497.37 million) in the ⁠spot market on July 31, selling euros from the Exchange Stabilization Fund as part of a joint US-Japan intervention this summer to shore up the yen.

Elsewhere, oil prices ​were headed for a second weekly decline as a continued US blockade of Iran eased fears of renewed fighting in the Middle East, though shipping attacks remained a supply risk.

Brent crude futures were up 0.25% at $96.06 a barrel while US crude eased 0.26% to $88.52 per barrel, though both were set to ⁠lose more than 2% for the week.

Spot gold gained 0.5% to $3,896.33 an ounce.

The International Energy Agency's member countries will release ​around 71 ⁠million barrels of emergency oil and products stocks through ‌end-February 2027, roughly doubling the ‌pace of the releases in September and October, the agency said on Friday.

Included in the release will be around 15 million barrels of diesel which are ‌scheduled to be released by end-February, almost entirely from government stocks in France ⁠and Germany, at a pace of 4 million to 5 million barrels in January before easing in February, the IEA said in a monthly report.

The move by the IEA, which manages industrialised countries' strategic oil inventories for use in severe oil shocks, is part of a record stocks release first announced ​in March after the Iran war cut supplies from the Middle ‌East, sending prices soaring.

Emergency oil stock releases in Europe are expected to total 33 million barrels, led by Germany and France, and around 37 million barrels is ⁠due to come from the US Strategic Petroleum Reserve. Government stocks account for at least 85% of all scheduled volumes.

The price of diesel, which powers transport, agriculture ​and industry, is ‌still close to record highs in many markets, threatening to push inflation ‌and the cost of living higher and adding to pressure on governments. Europe holds significant emergency diesel inventories and remains a net importer of the fuel.

In March, the ‌IEA announced a ‌strategic release of stocks of up to ⁠400 million barrels to make up for the disruption ‌to the oil market caused by the Iran war. Since then, member countries have put out 349 million barrels of emergency stocks, ⁠the IEA said.

"If current schedules are met, total emergency stocks released by ​IEA countries would reach around 420 million barrels, exceeding the 400 million barrels committed for release in March," the report said.

Agencies