Stocks Rise on Tech, Oil and Dollar Climb on Iran: Markets Wrap
(Bloomberg) — Asian stocks climbed as traders doubled down on the AI trade, brushing aside Middle East tensions even after President Donald Trump rejected Iran’s latest peace proposal, sending crude oil higher and Treasuries lower.
MSCI’s Asia Pacific equities gauge rose 0.6% with technology shares outperforming. South Korea, a poster child for AI investments, gained 4.5% to a record. A Bloomberg gauge of Asian chipmakers hit a peak after the Philadelphia Semiconductor Index surged to an all-time high on Friday. Video game maker Nintendo Co., however, fell as much as 10% in Tokyo after warning about higher chip prices.
US equity-index futures were little changed after the underlying gauges closed at a record on Friday. Contracts indicated a tepid start for European stocks.
While investors stayed upbeat on technology, developments in the Middle East weighed on broader markets. Brent crude rose 4.3% to over $105 a barrel as Trump’s rejection effectively prolonged the closure of the Strait of Hormuz. Higher oil prices, which stoked inflation concerns, weighed on bonds, with the 10-year Treasury yield climbing four basis points to 4.39%.
The dollar, the haven of choice during the Middle East conflict, strengthened against almost all its Group-of-10 peers. Gold fell to around $4,700 an ounce on bets interest rates will stay elevated.
Global equities have erased war-driven losses and climbed to records as investors bet heavy spending on AI will boost corporate profits. Asian shares have benefited as traders pile into chipmakers, seen as the “picks and shovels” of the AI supply chain. The relatively modest moves outside of tech also suggest that traders are pricing in an eventual de-escalation in the Middle East, although the path remains uneven.
“Earnings have been the primary driver of the market since markets decided to move past the peak of the war panic,” said Anna Wu, a cross-asset strategist at Van Eck Associates Corp. “We see markets start to look past current war volatility, in the absence of major escalations.”
Global stocks surged last week, pushing the S&P 500 and Nasdaq 100 to fresh records. A solid US employment report, along with a drumbeat of stronger-than-expected corporate results, has bolstered speculation that the world’s largest economy remains resilient in the face of energy stress triggered by the Iran war.
About 82% of the S&P 500’s companies have beaten first-quarter profit estimates, according to data compiled by Bloomberg.
“The AI infrastructure story remains the dominant force in global equities right now, with the data center build-out and the capex cycle behind it powering a concentrated rally in tech that is essentially running its own race,” said Josh Gilbert, a market analyst at eToro Ltd.
What Bloomberg Strategists Say…
The theme of Asian AI stocks outperforming is becoming a global narrative which is drawing in funds from all over the investing universe. Which is more than enough to offset minor blips in sentiment triggered by delays to a US-Iran peace deal.
— Mark Cranfield, MLIV. For full analysis, click here.
Across markets, the success of the momentum strategy — piling into recent winners — has effectively become a defining feature. A gauge of chipmakers jumped 11% in five sessions.
Crude oil is another key area of focus. While prices rose on Monday, the cost of a real-world oil cargo is dropping fast as buyers back away, in a dramatic reversal from last month’s bidding frenzy despite the ongoing closure of the Strait of Hormuz. The retreat provides a counterintuitive backdrop to warnings that the oil market is barreling toward a crisis point.
Beyond the war, traders have a lot to parse this week with the scheduled meeting between Trump and Chinese President Xi Jinping and US inflation data, which will offer clues on where interest rates are headed.
In currencies, the pound weakened ahead of a speech by UK Prime Minister Keir Starmer to forestall an immediate challenge to his job. Starmer will lay out a plan to turn the governing party’s fortunes around, including a commitment to take the UK closer to the European Union a decade after the Brexit vote.
“The pressure on Starmer to resign has increased,” Elias Haddad, global head of markets strategy at Brown Brothers Harriman, wrote in a note to clients. “Regardless, the risk the Labour government pivots further leftwards has diminished, which is supportive of GBP and gilts.”
Corporate News:
Alphabet Inc. is planning to issue yen bonds for the first time in a move that may help fund investments as artificial intelligence competition intensifies. Reliance Industries Ltd. is reversing its plans for the initial public offering of Jio Platforms Ltd., potentially India’s largest ever, to issue new shares instead of an offering by existing investors, the Economic Times reported. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 12:54 p.m. Tokyo time Japan’s Topix rose 0.2% Australia’s S&P/ASX 200 fell 0.5% Hong Kong’s Hang Seng fell 0.3% The Shanghai Composite rose 0.9% Euro Stoxx 50 futures rose 0.1% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.3% to $1.1757 The Japanese yen fell 0.3% to 157.16 per dollar The offshore yuan was little changed at 6.7940 per dollar Cryptocurrencies
Bitcoin was little changed at $80,717.34 Ether was little changed at $2,329.46 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.39% Japan’s 10-year yield advanced 2.5 basis points to 2.495% Australia’s 10-year yield was little changed at 4.98% Commodities
West Texas Intermediate crude rose 4.7% to $99.93 a barrel Spot gold fell 0.8% to $4,677.73 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Bernadette Toh, Winnie Hsu and Matthew Burgess.
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