Asian Stocks Snap Two-Day Fall as Chipmakers Rally: Markets Wrap

(Bloomberg) — Asian shares climbed to their highest level since mid-July as investors renewed bets on the artificial intelligence trade, boosting chip stocks. Oil and the dollar dropped on optimism over an interim US-Iran deal.

MSCI’s Asia Pacific equities gauge climbed over 2%, its first gain in three sessions. South Korea’s Kospi Index and Japan’s Nikkei 225 Stock Average rallied about 3%, while Australian shares hit an all-time high.

Chip stocks remained in focus, with Samsung Electronics Co. and SK Hynix Inc. both gaining more than 2% in Seoul. Nvidia Corp. advanced over 2% in post-market trading after Elon Musk touted the company’s Vera Rubin chips.

Futures contracts for the S&P 500 Index edged higher after the benchmark closed at a record high on Tuesday. A cautious tone lingered as SpaceX shares fell 7.5% in extended trading after the company projected higher-than-expected spending on its AI business. Advanced Micro Devices Inc. also slid 9% after an underwhelming outlook.

Elsewhere, Brent extended its losses on optimism over a possible interim deal between Washington and Tehran. The commodity fell 1.1% to about $78.50 a barrel as Axios reported the US, Iran and Oman are closing in on an agreement to reopen the Strait of Hormuz, and aiming for a Wednesday announcement. Treasuries advanced along with gold as traders curbed expectations for interest-rate hikes.

Strong earnings from technology megacaps have helped restore confidence after a month of volatility in AI stocks that erased gains at several hedge funds. Investors are also watching whether progress toward reopening the key shipping route extends the recent decline in oil prices, easing inflation pressures and tempering expectations for Federal Reserve rate hikes.

“Tech results over the past week clearly show that AI investment will continue to rise sharply,” said Vey-Sern Ling, managing director at Union Bancaire Privée. “This is reassuring for investors, especially with valuations now looking much more reasonable after the recent correction.”

Technology stocks are coming back because the three pressures behind the recent selloff — AI spending concerns, higher bond yields and the increase in oil prices — are all easing at the same time. Strong earnings are reassuring investors that AI demand remains intact, while lower oil and bond yields are taking pressure off valuations.

Earlier, a US semiconductor gauge posted its strongest four-day advance since 2020.

Still, “it’s not an all-clear, especially as returns on AI capex still need to be proven,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “But after leverage and crowded positioning were flushed out, even modest relief can produce an outsized rebound.”

In other corners of the market, the yen’s gains, fueled by the joint US-Japan intervention, stalled.

Treasuries rallied in the New York session as signs of progress toward a diplomatic resolution of the Iran war sent oil prices lower, curbing expectations for more than one Fed interest-rate hike in the coming year. The yield on the benchmark 10-year Treasury edged down to 4.60% Wednesday.

The dollar, the haven of choice during the Middle East conflict, dropped. Gold rose 1.2% to about $4,125 an ounce as the decline in oil prices reduced expectations that rates will stay higher for longer.

Elsewhere, Asia-based hedge funds logged extensive losses in July, as the tech selloff led to what Goldman Sachs Group Inc. prime brokers said was the worst month for regional stockpickers on record.

Back to geopolitical news, a short-term deal may help normalize commercial shipping in the strait — a crucial conduit for global energy supplies — and prevent the resumption of fighting in the Middle East.

But even if such an agreement is reached, it might still fail to end the war conclusively or resolve Trump’s concerns about Iran’s nuclear program.

Qatar said a proposal had been drafted, while US and Iranian officials expressed optimism about an agreement to reopen the crucial waterway, impacting oil prices.

“With so much optimism now priced into the oil market — and the risk of a repeat of last week’s false dawn still very real — the balance of risks appears to be becoming more skewed back to the upside,” wrote Tony Sycamore, an analyst at IG Markets in Sydney.

Corporate Highlights:

SpaceX fleshed out its plans to compete directly with the largest mobile phone carriers in the US by complementing its satellite-based internet service with land-based infrastructure. The Federal Communications Commission is drafting a ban on imports of some Chinese data center components to protect US data center infrastructure, Reuters reported. India expanded the size of its share sale in Life Insurance Corp. to raise $3.3 billion after the base offer was oversubscribed. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.3% as of 12 p.m. Tokyo time Japan’s Topix rose 1.5% Australia’s S&P/ASX 200 rose 0.5% Hong Kong’s Hang Seng was little changed The Shanghai Composite rose 0.9% Euro Stoxx 50 futures rose 0.5% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1535 The Japanese yen rose 0.2% to 157.46 per dollar The offshore yuan was little changed at 6.7466 per dollar The Australian dollar was little changed at $0.7047 Cryptocurrencies

Bitcoin was little changed at $64,321.61 Ether fell 0.1% to $1,873.14 Bonds

The yield on 10-year Treasuries declined one basis point to 4.60% Japan’s 10-year yield declined three basis points to 2.825% Australia’s 10-year yield declined seven basis points to 4.90% Commodities

West Texas Intermediate crude fell 1.4% to $74.73 a barrel Spot gold rose 1.3% to $4,129.55 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Cheng.

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