Markets fret over growth and inflation despite easing oil prices
SPY•Global markets are weighed down by concerns that inflation will stay elevated as growth slows, despite oil falling almost 20% this week to below $100 a barrel. Rising borrowing costs, high food prices and a selloff in technology shares add to concerns about financial conditions.
1. Inflation pressures persist
Oil has fallen almost 20% this week to below $100 a barrel, but remains up almost 60% this year; natural gas is nearly three times its level at the start of 2026. US one-year inflation expectations rose to 4.7% in October from 4.6% in September and 3.4% in February. The UN Food and Agriculture Organization's Food Price Index is at its highest level in nearly four years.
2. Borrowing costs rise
US government borrowing costs surged 85 basis points in the third quarter, while those in France and Italy rose more than 100 basis points. ECB estimates showed the latest bond-yield rise would reduce cumulative economic growth by 100 basis points in 2027-28 compared with September projections.
3. Technology shares under pressure
More than $2 trillion was wiped off the Nasdaq 100's market value last month as investors questioned the strength of the AI boom. Further declines could erode household wealth, raise corporate funding costs and curb risk appetite. Euro zone growth slowed sharply in October, while US growth remained resilient, supported in part by AI infrastructure investment.
