MARKET WRAPS
Stocks:
European shares were largely lower as chip stocks fell sharply on investor concerns the artificial-intelligence build-out will slow.
European chip stocks followed Asian peers lower after leaders of some of the biggest AI companies said that they needed to slow development of the technology for safety reasons.
"AI valuations assume not only strong demand but also a relentless pace of model development," said Saxo Markets.
Oil prices started the week higher as conflict in the Middle East spread. Iran-backed Houthi militants have seized key territory around the strategic Bab al-Mandeb Strait. Brent crude oil traded close to $108 a barrel.
The economic data flow will thin out in the coming week, giving markets time to absorb the European Central Bank's interest-rate hike on Thursday and its signals for the policy path, which suggest more tightening is in the pipeline.
Focus is now turning to the Federal Reserve's interest-rate decision on Wednesday, where a hike is a possibility but not a done deal.
Elsewhere, the Bank of England and Bank of Japan will also announce new policy decisions on Thursday and Friday, respectively. The BOE is widely expected to hold rates, while the BOJ is expected to hike.
U.S. Markets:
Stock futures were lower as investors mull ongoing worries about AI safety.
An interest-rate decision by the Fed will be firmly at the center of markets' attention in the coming week, where a hike looks a possibility after strong jobs data and solid inflation numbers.
Forex:
The dollar rose to an 11-day high against a basket of currencies, buoyed by increased prospects of an interest-rate hike at this week's Fed meeting and by higher oil prices.
Sterling fell to an 11-day low against the dollar as markets await interest-rate decisions by the Fed and the Bank of England on Wednesday and Thursday, respectively.
Bonds:
Eurozone government bond yields edged higher with the 10-year Bund yield hitting a new 15-year high, Tradeweb data show.
Treasury yields fell across maturities except for small increases on the ultralong end, as investors awaited a likely rate hike by the Federal Reserve on Wednesday.
Higher oil prices were one reason behind last week's rise in Treasury yields, said Payden & Rygel. Another reason was that U.S. economic growth remains remarkably resilient despite a series of shocks, it said, pointing to hyperscalers' continued AI-related capital expenditures.
Energy:
Brent crude rose 2.2% while WTI futures were 2.2% higher.
Metals:
Gold futures traded 1.1% lower as expectations the U.S. will hike interest rates solidify.
Iron ore
Iron ore fell in early trading. Prices were dragged by weak demand due to poor profitability at steel mills, Tongguan Jinyuan Futures said.
EMEA HEADLINES
AstraZeneca Breast-Cancer Drug Misses Goal in Late-Stage Trial
AstraZeneca said its new breast-cancer pill missed the key goal of slowing the disease from worsening in a late-stage clinical trial.
The U.K. drugmaker evaluated its Etcamah medicine, in combination with Pfizer's Ibrance, as a first-line treatment for patients with a type of advanced breast cancer that hadn't received any systemic treatment for advanced disease, it said late Friday.
BOE Expected to Hold Key Rate, Slow Down Quantitative Tightening
The Bank of England is set to keep interest rates on hold this week, though rate-setters will likely leave the door open to more tightening as tensions in the Middle East escalate further.
Investors are also likely to focus on the continued, albeit slower, reduction of the central bank's sovereign-debt portfolio, as yields on those bonds, known as gilts, have reached multidecade highs.
Hugo Boss Chairman to Step Down After Frasers Talks
Hugo Boss said its supervisory board chairman Stephan Sturm plans to step down after Frasers Group, the company's largest shareholder, reached near-majority ownership and said it would review whether to keep backing him.
The German premium-apparel company said Monday that Sturm's decision followed discussions against the backdrop of recent changes in the company's shareholder structure.
Metlen Signs Greek Energy Supply Deal with Petronas
Metlen Energy & Metals said it entered an energy supply pact with Malaysia's Petronas.
The London-listed industrial and energy company on Monday said it entered into a long-term agreement for the import and supply of liquefied natural gas to Greece.
GLOBAL NEWS
Oil Prices Rise as Saudi East-West Pipeline Attack Threatens Export Routes
Oil prices rose in early European trading Monday as supply concerns intensified after attacks shut a key Saudi oil pipeline and Houthi militants in Yemen tightened their grip on the Bab al-Mandeb Strait, adding pressure on Middle East crude-export routes already constrained by the U.S.-Iran conflict.
Front-month Brent crude oil futures rose 2.9% to $107.68 a barrel, while front-month West Texas Intermediate crude oil futures gained 2.8% to $102.88 a barrel. Both benchmarks ended last week sharply higher, with Brent gaining 8.7% and WTI rising 9.4%.
BOE Expected to Hold Key Rate, Slow Down Quantitative Tightening
The Bank of England is set to keep interest rates on hold this week, though rate-setters will likely leave the door open to more tightening as tensions in the Middle East escalate further.
Investors are also likely to focus on the continued, albeit slower, reduction of the central bank's sovereign-debt portfolio, as yields on those bonds, known as gilts, have reached multidecade highs.
Bessent Says the U.S. Can Grow Its Way Out of the Debt Crunch. What Would It Take?
The U.S. debt picture looks bleak. Is there a way out of the coming crunch?
One path requires tough trade-offs lawmakers have ducked for decades: higher taxes and lower spending. Another route sounds more appealing: growth. Even if the country owes trillions more dollars, additional debt will matter less if the economy booms even faster.
Russia Is Churning Out Smart, Cheap New Weapons Faster Than Ukraine or the U.S.
Just as Ukraine was learning how to parry Russia's drone attacks, Moscow has moved the goal posts with a new generation of innovative jet-powered weapons.
New Geran drones and Banderol cruise missiles are lethal reminders that Russia still has the resources and supply chains to field fresh threats, this time packed with advanced electronics that allow them to find targets accurately and evade interception. Crucially, the leap forward was enabled in large part by components sourced from China, in violation of international sanctions, say Ukraine and others, based in part on wreckage from the few shot down so far.
Widening Mideast Instability Squeezes Global Oil Supplies
DUBAI-Yemen is the latest domino to fall in the chain of instability set off by the U.S. war with Iran, a development that deepens the risk to global energy supplies and complicates efforts to find a diplomatic off-ramp to the conflict.
The impoverished country has long been at war in a forgotten corner of the world. But the lightning offensive by Iran-backed Houthi militants who seized key territory around the strategic Bab al-Mandeb Strait last week has made Yemen an important variable in the growing set of interlocked regional conflicts that are stretching America's military capabilities and handing more leverage to Tehran.
Trump Sees Race Against China as Key Issue on AI Regulation
WASHINGTON-President Trump and White House AI adviser David Sacks this weekend defended the administration's strategy of minimal regulation after the heads of the nation's top artificial-intelligence companies endorsed a coordinated slowdown in the technology's development.
"We can put up guardrails, and we can do this and that, but I think you have a lot of negative forces that are bringing it up," Trump told reporters Sunday while traveling in Ireland. "And they're bringing up things that won't happen."
Trump Pledges to Rescind 10% Tariff on Irish Whiskey
President Trump made a surprise trade announcement at the Irish Open golf tournament on Sunday, saying before the trophy ceremony that he plans to rescind the U.S.'s 10% tariff on Irish whiskey.
"Everybody's been bugging me about this one thing: 'Would you do me a favor? It's so unfair what's going on. Could you possibly take the tariffs off of Irish whiskey?'" Trump said before handing the trophy to Shane Lowry. Trump said Lowry talked to him about it, as did Micheál Martin, Ireland's taoiseach, or prime minister.
Write to priscila.barrera@wsj.com