Stocks Rise on Tech, Focus Turns to US-China Talks: Markets Wrap
(Bloomberg) — Asian stocks and US equity-index futures advanced as investors bet the record-breaking rally driven by enthusiasm for the artificial intelligence trade has further room to run.
The MSCI Asia Pacific Index rose 0.4% to near its all-time high, with South Korea’s Kospi — the world’s best-performing market this year — leading with a 1.7% gain. A regional gauge of tech stocks hit a record. Contracts for the tech-heavy Nasdaq 100 Index climbed 0.5% and those for the S&P 500 Index rose 0.2% after the underlying gauges closed at all-time highs on Wednesday.
A strong outlook by Cisco Systems Inc. reinforced the bullish narrative for the technology sector, with the company’s shares surging 18% in extended trading. Optimism for tech and stocks masked worries about inflation that have driven bets the Federal Reserve will raise interest rates next year. Treasuries pared some of Wednesday’s losses, with the yield on the 10-year slipping one basis point to 4.46%.
Chinese equities, near their highest level since 2021, edged lower, with attention on the summit between President Donald Trump and Xi Jinping in Beijing. The offshore yuan is on its best winning streak since 2017. Alibaba Group Holding Ltd. shares jumped more than 8% in Hong Kong after accelerating cloud revenue growth.
Equities globally have pushed to record highs, supported by strong corporate earnings and expectations that AI-driven spending will sustain growth. Traders are also turning to geopolitical developments in Iran and the summit between Xi and Trump for next moves, as concerns mount that the war in the Middle East could keep inflation elevated and weigh on the global economy.
“Attention now turns to ongoing geopolitical headlines with President Trump continuing his visit to China and markets remaining highly sensitive to any developments surrounding the Strait of Hormuz,” Nick Twidale, chief market analyst at AT Global Markets, wrote in a note to clients.
Trump arrived in Beijing for the first state visit to China by a US leader in nine years, as the world’s two largest economies look to stabilize ties with a summit playing out against the backdrop of the Iran war.
Trump is scheduled to meet with Xi at the Great Hall of the People on Thursday morning.
What Bloomberg Strategists Say…
“There is, however, the risk of investors pricing in too much of a warm glow from the Beijing discussions. Should there be any sign of disagreement on trade or geopolitical issues between the two leaders, that would deliver an unwelcome jolt to the buoyant sentiment across markets.”
— Mark Cranfield, MLIV. For full analysis, click here.
Elsewhere, Brent crude oil extended losses, trading at $105.30 a barrel. The dollar was little changed after strengthening over the past three days.
Elsewhere, US inflation reports this week have shown mounting price pressures, pushing traders to boost wagers on a Fed rate hike in the coming year. The yield on benchmark 10-year Treasuries rose to the highest since July.
US wholesale inflation accelerated in April to the fastest pace since 2022 on a war-driven increase in energy prices that’s feeding into higher freight transportation costs. The producer price index rose 6% from a year ago, according to Bureau of Labor Statistics data out Wednesday, eclipsing economist estimates and coming in after a hot consumer price readout.
“One takeaway is that companies are not passing through costs to consumers across the board just yet,” noted Chris Low at FHN Financial. “But company input costs are sharply higher, which obviously increases pressure to pass through costs in future.”
Separately, the Senate narrowly confirmed Kevin Warsh as chair of the Fed, setting up the most controversial leadership transition at the US central bank in decades and a test of its political independence.
First-quarter profits at S&P 500 companies have surged 27% so far, more than double the roughly 12% analysts had expected — the fastest year-on-year earnings growth outside of recoveries from major shocks since 2004.
Morgan Stanley strategists are turning more positive on US equities in a bet that profits and a strong economy will keep the bull market running. The team led by Mike Wilson expects the S&P 500 to reach 8,300 in the next 12 months. The gauge is currently trading near 7,444.
“Resiliency in earnings data despite geopolitical risk, private credit concerns and AI disruption is supportive of our view,” Wilson said.
Corporate Highlights:
Cerebras Systems Inc. raised $5.55 billion in its US initial public offering, as the artificial intelligence chipmaker seizes on the surging demand for semiconductors. Elon Musk’s xAI has recruited multiple Wall Street firms with ties to the billionaire’s business empire to test its Grok chatbot, according to people familiar with the matter, part of a push to bolster revenue ahead of parent company SpaceX’s initial public offering. Ford Motor Co. jumped after Morgan Stanley issued a bullish call that the automaker’s energy storage business could soon make a deal with hyperscalers. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 10:45 a.m. Tokyo time Japan’s Topix fell 0.4% Australia’s S&P/ASX 200 fell 0.2% Hong Kong’s Hang Seng rose 1.1% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures rose 1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1717 The Japanese yen was little changed at 157.89 per dollar The offshore yuan was little changed at 6.7851 per dollar The Australian dollar fell 0.1% to $0.7249 Cryptocurrencies
Bitcoin fell 0.3% to $79,457.79 Ether was little changed at $2,261.52 Bonds
The yield on 10-year Treasuries was little changed at 4.46% Japan’s 10-year yield was little changed at 2.595% Australia’s 10-year yield declined five basis points to 5.01% Commodities
West Texas Intermediate crude fell 0.2% to $100.80 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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