By Dhara Ranasinghe and Gregor Stuart Hunter
LONDON, Oct 21 (Reuters) - Global stocks nudged up on Wednesday, as early signs from the earnings season pointed to strong profits for global firms and shored up sentiment in the face of nagging worry about the strength of the AI trade and turbulence in government bonds.
World markets have had a rocky ride this month as a sharp selloff in AI-related shares has soured sentiment towards the tech sector, while France's bond market has come under pressure as violent
protests add to its political woes.
European markets were broadly higher in early trade, while US stock futures pointed to a positive open for Wall Street shares ahead of earnings reports from the likes of Meta and Tesla later on.
With 13% of S&P 500 companies reporting, 86% have beaten earnings estimates, according to LSEG data.
"What we've seen over 2026 so far is effectively that markets have positively responded to strong earnings," said Neil Fisher, an investment specialist at St James's Place in London.
"Where they have not always responded positively to stronger earnings, especially on the AI side of things, is when further CapEx (capital expenditure) and further spending on AI gets put on the table."
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rallied around 1%, led by a more than 3% gain in Korea, while Japan's Nikkei 225 rose almost 1%.
AI WINNERS AND LOSERS
Australian data centre operator NextDC shed nearly half of its market capitalisation on Wednesday after sharply cutting revenue forecasts for the year ahead and putting future developments on hold, extending the burst of negative sentiment towards global AI stocks.
In contrast shares in South Korean artificial intelligence infrastructure company Elice Group surged almost 30%, rebounding from a slump in its market debut on Tuesday.
Shares in companies in Japan and Taiwan that are suppliers to Tesla and SpaceX advanced after Elon Musk said on Tuesday that a merger of the two companies would be "a good idea" and that they had formed special committees to discuss a union.
Meanwhile in Mumbai, Jio Platforms'
WEAK SPOTS
Indonesia's central bank held its main interest rate unchanged on Wednesday, but raised its deposit facility rate by 25 basis points and cut banks' reserve requirement ratio by 2 percentage points to support liquidity and lending after markets were roiled by an MSCI warning last week that Indonesian stocks could be excluded from its major benchmarks.
The rupiah slipped back below the key 18,000 level to hold on to its title as the worst-performing Asian currency, down 7.4% this year.
France, at the heart of recent turmoil in European bond markets, also remained in the spotlight.
Its bond yields rose again as investors took stock of the widespread protests across France that are putting pressure on a government that was already struggling to shore up its finances.
French 10-year bond yields have risen more than 16 basis points so far this week to just shy of the 5% mark. That's by far the most among the bonds of the world's largest economies, which have risen by an average of just over 5 bps, according to LSEG data.
French supermarket operator Carrefour fell almost 13% after cutting its guidance due to the recent protests.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said neither the unrest nor France's fiscal woes should detract from a resilient euro zone economy and strengthening European earnings cycle.
"We keep our attractive rating on euro zone equities," he said.
A rebound in the oil price back above $110 a barrel, after a short-lived drop the previous day, added to the negative sentiment across bond markets with US Treasury yields also rising in London trade.
US envoy Steve Witkoff is due to meet Russian President Vladimir Putin later in the day after what a US official called "constructive" talks with Ukrainian President Volodymyr Zelenskiy in Norway, as President Donald Trump said it was time for Ukraine to end the war.
In currency markets, the dollar index, which measures the currency against six peers, was steady at 101.79, while the French jitters kept the euro on the defensive. The single currency was down around 0.2% at $1.122.
The yen was flat against the dollar at 158.15 after government data released on Wednesday showed Japan's exports in September rose 16.7% from a year earlier, missing estimates. Strong demand for semiconductors and AI-related products offset weakness in other sectors.
Elsewhere, data showed UK inflation rose by 3.5%, Britain's government borrowed more than expected again in September and public debt surpassed £3 trillion, underscoring finance minister John Healey's challenge in his first budget next week.
(Reporting by Dhara Ranasinghe in London and Gregor Stuart Hunter in Singapore, Editing by Louise Heavens)
