By Amanda Cooper

LONDON (Reuters) -Global shares fell on Thursday, after Facebook owner Meta Platforms and Microsoft both warned of rising costs for artificial intelligence, while evidence of strong U.S. economic growth helped support the dollar.

Big Tech’s warnings stoked worries among investors that the pay-off for heavy spending on AI may take longer than many had hoped. And with Amazon and Apple due to report later in the day, the mood was cautious.

In currencies, the dollar fell back from three-month highs against the yen after the Bank of Japan kept interest rates on hold as expected, but carried a hawkish tone, prompting some analysts to raise the possibility of a December rate hike.

Investors were also treading warily ahead of U.S. non-farm payrolls data on Friday, the presidential election next Tuesday and a Federal Reserve policy decision on Thursday.

Data on Thursday showed the Fed’s preferred measure of inflation – the core personal consumption expenditures (PCE) index – rose by 2.7% in September, compared with expectations for an increase of 2.6% and matching the rise in August.

A separate report showed initial weekly jobless claims fell by more than expected in the latest week, pointing to the health of the labour market.

S&P 500 futures were down 0.7% on the day, as were Nasdaq futures, indicating a weaker start to trading on Wall Street.

“For financial markets, the figures are unlikely to be a game-changer, with participants for now squarely focused on next Tuesday’s presidential election, even if the nuisance of the October jobs report looms on tomorrow’s data docket,” Pepperstone strategist Michael Brown said.

On a company level, shares in Microsoft and Meta, which have risen 15% and 67%, respectively, so far this year, fell in premarket trading by 1-2%.

“There are so many excuses for not increasing your exposure to the market right now and the tech earnings have put the cherry on the top,” Trade Nation market strategist David Morrison said.

AI posterchild Nvidia is the last of the “Magnificent 7” megacap tech companies to report earnings, in about three weeks’ time. Tesla reported last week, with Alphabet following on Tuesday.

FRAGILE NERVES

In Europe, the STOXX 600 hit its lowest in seven weeks in a heavy day for earnings, as a drop in shares of French lender BNP Paribas after results and in tech stocks like ASML and SAP offset a bounce in energy and the wider banking sector.

Meanwhile, in the final stretch of the U.S. presidential election contest, opinion polls still put Republican Donald Trump and Democrat Kamala Harris neck-and-neck, although financial markets and some betting platforms have been leaning towards a Trump victory.

The dollar index dipped 0.17% to around 104, just below Tuesday’s near three-month highs. The U.S. currency fell by the most against the yen, down 0.5% to 152.695, still within range of this week’s high of 153.885. 

The dollar is set for a rise of nearly 6.5% against the yen in October with political uncertainty in Japan after the coalition government lost its majority in parliamentary elections at the weekend potentially hampering the BOJ’s efforts to normalise monetary policy.

“It supports our forecast for the BoJ to raise rates sooner than current market expectations, although we have pushed back the timing of our forecast for the next rate hike from December to January in light of recent political instability in Japan,” MUFG currency strategist Lee Hardman said.

“One final rate hike this year can’t be completely ruled out if the yen weakens sharply after the U.S. election,” he said.

Gold touched another record high of $2,790.15 an ounce, before retracing a touch to $2,775, while oil rose 0.8% to $73.16 a barrel after weekly data showed an unexpected drop in fuel inventories that offered some reassurance about energy demand.

(Additional reporting by Kevin Buckland in Tokyo and Wayne Cole in Sydney; Editing by Toby Chopra, Kirsten Donovan)

---