AI Trade Fuels Stocks Amid Mideast Peace Push: Markets Wrap
(Bloomberg) — Resurgent demand for technology stocks pushed US equities to new highs amid rising optimism that Washington and Iran are seeking to extend a two-week truce.
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S&P 500 futures edged higher after the benchmark closed above the 7,000 mark for the first time. Nasdaq 100 contracts advanced 0.2% as Taiwan Semiconductor Manufacturing Co.’s strong revenue outlook highlighted the resilience of AI chip demand. Meanwhile, Elon Musk’s staff are seeking quotes for chipmaking equipment for his envisioned Terafab, adding to the upbeat mood in tech.
Brent rose above $96 a barrel as movements through the Strait of Hormuz remained all but paralyzed. Global bonds rose, led by gains in Europe where central bank policymakers signaled they’re in no rush to raise interest rates. The dollar snapped an eight-day losing streak while gold rose above $4,800 an ounce.
Stock markets are extending their stark rebound as signs of easing tensions in the Middle East, combined with a fresh burst of AI optimism and corporate earnings, have pushed investors to abandon their cautious views. Wall Street veteran Ed Yardeni said investors are looking past the war in the Middle East and focusing on market fundamentals.
“History shows that geopolitical crises turn out to be great buying opportunities,” Yardeni told Bloomberg TV. “That’s the situation we’re in right now where investors are looking past the war.”
Technology stocks led gains in Europe where the Stoxx 600 rose 0.2%. A gauge for the sector in Asia climbed to a record high, while Taiwan’s total market cap topped $4.1 trillion to overtake the UK.
“TSMC describing AI demand as ‘extremely robust,’ pushing capex to the upper end of a $52-56 billion range, and signaling that the next three years of investment will significantly exceed the last three; that is not the language of a cycle nearing its peak,” said Amanda Lyons, information technology sector lead and head of research at Energy Group Capital.
Potential suppliers to Musk’s Terafab project — which has the goal to supply 1 terawatt of annual computing capacity — including Applied Materials Inc. and Lam Research Corp. saw broad gains. TSMC rose 1% in US premarket trading after closing at an all-time high in Taipei, before erasing the move. Microsoft Corp. was the standout performer among the Magnificent Seven with a 1.5% advance.
Technology stocks have been snapped up in recent weeks after lagging the market for much of the year, putting the Nasdaq 100 on course for its longest winning streak since 2017 if the gauge extends gains on Thursday.
Claudia Panseri of UBS Wealth Management said her exposure to artificial intelligence stocks is focused on the US and China and is “more selective” than two years ago. “We also prefer companies which are still investing using cash, rather than companies issuing bonds,” Panseri told Bloomberg TV.
What Bloomberg’s Strategists Say:
“In the medium term, I worry the futures curve is too optimistic on commodity price declines and that markets haven’t priced the stagflationary impact of the war. In the near term though, these pressures may not come through yet, leaving equities without a clear downside catalyst.”
— Skylar Montgomery Koning, macro strategist. For the full analysis, click here.
Corporate News:
PepsiCo Inc.’s quarterly revenue and earnings beat expectations, as the maker of Doritos and Lay’s sees improvement in salty snacks volume following recent price cuts. Pernod Ricard SA expects the war in the Middle East to drive sales down as much as 4% for the year as it continues to struggle with weak demand in the US and China. Taiwan Semiconductor Manufacturing Co. booked a 58% surge in profit, a sign that the Middle East war in its first few weeks did not depress booming AI investment. Elon Musk’s lieutenants have reached out to chip industry suppliers including Applied Materials Inc., Tokyo Electron Ltd. and Lam Research Corp. for his envisioned Terafab, early steps in an audacious and likely arduous attempt to break into the production of cutting-edge chips. EasyJet Plc shares fell the most since 2022 after the UK budget airline warned of a loss in the first half of this fiscal year because of disruptions from the Iran war. Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 11:35 a.m. London time S&P 500 futures were little changed Nasdaq 100 futures rose 0.2% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index rose 1.2% The MSCI Emerging Markets Index rose 1.2% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.2% to $1.1776 The Japanese yen was little changed at 159.09 per dollar The offshore yuan was little changed at 6.8219 per dollar The British pound fell 0.2% to $1.3534 Cryptocurrencies
Bitcoin fell 0.5% to $74,499.51 Ether fell 1.1% to $2,337.18 Bonds
The yield on 10-year Treasuries was little changed at 4.28% Germany’s 10-year yield declined two basis points to 3.02% Britain’s 10-year yield declined two basis points to 4.80% Commodities
Brent crude rose 1.6% to $96.44 a barrel Spot gold rose 0.4% to $4,809 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling and Subrat Patnaik.
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