Global Stocks Rally on Tech as Fed Hike Bets Ease: Markets Wrap

(Bloomberg) — Global stocks headed for a third weekly gain as investors returned to the artificial intelligence trade and cooling US inflation bolstered bets that the Federal Reserve would refrain from raising interest rates.

MSCI’s Asia Pacific share benchmark rose 0.3% Friday, putting the All Country World Index on course for its longest weekly winning streak since April. The global benchmark closed at a record high Thursday, as did the S&P 500 Index, as semiconductor shares extended their rebound from last month’s selloff.

South Korea’s Kospi Index — a bellwether for AI investments — jumped 10% this week, snapping a seven-week run of losses. Samsung Electronics Co. and SK Hynix Inc. both advanced more than 15% in the past five days. The Kospi climbed 1.6% Friday.

Treasuries held on to this week’s gains, bolstered by two days of benign US inflation numbers, with shorter-maturity notes outperforming their longer-dated counterparts. The yield on the rate-sensitive two-year note was little changed at 4.15%, after falling six basis points Thursday.

Money markets are now pricing in about a 35% chance of a Fed rate hike in September, despite a recent rally in crude oil prices and no sign of a deal to ease Middle East tensions. Back-to-back benign inflation prints, coupled with last week’s softer-than-expected jobs report, eased pressure on policymakers to tighten policy at its meeting next month, allowing equity traders to turn their attention to the revival in the AI trade.

“The modest easing of uncertainty surrounding US monetary policy has become catalyst for tech rebound,” said Yugo Tsuboi, chief strategist at Daiwa Securities Co. “With US inflation showing no signs of worsening, excessive concerns over the Fed turning hawkish have eased. That is prompting buying particularly in high-growth stocks.”

Momentum returned to technology stocks after last month’s selloff, which was sparked by concerns the year’s hottest trade had run too far, too fast. Robust earnings from several megacap companies eased some of those fears, drawing investors back to AI and pushing the Nasdaq 100 more than 1% higher Thursday to its highest since late June.

The Philadelphia Stock Exchange Semiconductor Index rose 0.5% to close at its highest level since mid July. An Asian gauge of chip-related stocks gained almost 1% on Friday, set for its highest close since July.

“A huge amount of hyperscaler money is flowing into hardware,” said Hitoshi Asaoka, chief strategist at Asset Management One. “That is translating into extremely strong sales and profit growth for hardware companies. Investors are returning to the idea of, ‘let’s look at the earnings themselves again.’”

In other corners of the market, Brent held its losses from the prior session, trading around $87.10 a barrel. Gold slipped 0.7% to $4,320 an ounce.

China’s 10-year bond yield fell to the lowest since July last year after the central bank injected liquidity into the market through overnight reverse repos on Friday, marking its first such operation in the middle of a month.

In Asia, the yen remained within striking distance of 160 per dollar, even after Prime Minister Sanae Takaichi’s government was said to support an interest-rate increase. The Japanese currency was little changed Friday, near 159.40 per dollar.

As investors have trimmed bets on Fed rate hikes, the rate-sensitive short-dated Treasuries outperformed longer maturities. The extra yield on 30-year Treasuries over their five-year peers has widened for a third straight week, the longest such run since mid-April.

Even as Treasuries rallied Thursday, the US sold 30-year bonds at the highest yield in a quarter century, underscoring the premium investors are demanding to finance the nation’s deficits.

“The next round of data that we get in September and the lead up to the meeting will be pretty critical,” said BofA Securities economist Stephen Juneau. At the same time, “the market obviously has started to really discount hikes more and more given that the data in recent months has been more dovish.”

Corporate Highlights:

OpenAI is on track to generate annualized revenue of more than $40 billion based on its current performance, according to people familiar with the matter, roughly doubling its run rate from the end of 2025 and bolstering the company’s plans for a Wall Street debut. Applied Materials Inc. delivered an estimate-beating forecast that still got a lukewarm reaction from investors, a sign of the lofty hopes surrounding a company that’s key to the AI boom. Advanced Micro Devices Inc. raised $4.75 billion in its biggest-ever US dollar bond offering, adding to a wave of debt tied to the AI boom. JD.com Inc. posted its first quarterly revenue decline since listing in 2014, in the latest sign of waning Chinese consumer sentiment. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:50 p.m. Tokyo time Nikkei 225 futures (OSE) rose 0.7% Japan’s Topix rose 0.6% Australia’s S&P/ASX 200 fell 0.9% Hong Kong’s Hang Seng fell 0.9% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures rose 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1538 The Japanese yen was little changed at 159.38 per dollar The offshore yuan was little changed at 6.7456 per dollar Cryptocurrencies

Bitcoin fell 0.1% to $63,289.6 Ether fell 0.1% to $1,881.9 Bonds

The yield on 10-year Treasuries was little changed at 4.65% Japan’s 10-year yield was unchanged at 2.865% Australia’s 10-year yield was little changed at 4.99% Commodities

West Texas Intermediate crude was little changed Spot gold fell 0.5% to $4,326.88 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma, Momoka Yokoyama and Elaine Lai.

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