Tech Drives Stock Rally as OpenAI Fuels Optimism: Markets Wrap

(Bloomberg) — Technology stocks drove global indexes to fresh highs after an OpenAI share sale catapulted the firm to the world’s most valuable startup, bolstering optimism for artificial intelligence.

Nasdaq 100 futures climbed 0.3%, putting the gauge on track for a fifth straight gain. Europe’s Stoxx 600 rose 0.7%, led by an advance of more than 2% in technology shares. In Asia, equities rose past last month’s record close as chipmakers rallied. MSCI’s global index also notched a fresh high.

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OpenAI’s valuation soared to $500 billion after current and former employees sold about $6.6 billion of stock, boosting the company’s price tag well above its previous $300 billion level. The ChatGPT owner also forged agreements with South Korean firms to supply chips for its Stargate project.

The AI boom has powered global stocks to successive highs, with a resumption of interest-rate cuts and resilient earnings adding to the bullish momentum. For now, investors also see limited risk from the political impasse in Washington, which has triggered the first government shutdown in nearly seven years.

“The tech sector is so large and it’s doing so well,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “The reason the market is prepared to pay those high valuations for the tech sector is really because we don’t see good growth opportunities outside tech.”

Treasuries mostly held Wednesday’s gains, with the yield on 10-year notes steady at 4.09%. After Fed rate-cut expectations pulled yields down from January’s high near 4.80%, traders are now contending with a temporary blackout in economic data amid the government shutdown.

The Bureau of Labor Statistics’ nonfarm payrolls data on Friday will likely be delayed, as well as the usual weekly initial jobless claims figures due later today.

Money markets are almost fully pricing a quarter-point Fed cut at the end of the month and see an 80% chance of another in December to support a cooling labor market.

“If you really dig into the labor market data, it’s not just an AI structural story, it’s not just a lower immigration story, you are seeing that cyclical demand weakness,” Kim Crawford, global rates portfolio manager at JPMorgan Asset Management, told Bloomberg TV. “The clearest part to this puzzle is wage growth, there is a lack of wage growth in the US.”

The dollar fell for a fifth day, while gold extended a record-breaking rally.

Strategists noted that past shutdowns have typically had little macroeconomic impact. At a White House press conference on Wednesday, Vice President JD Vance said he doesn’t anticipate a long shutdown, adding that layoffs will come if it lasts for days or weeks.

“This is all very much a storm in a teacup,” wrote Michael Brown, a senior market strategist at Pepperstone. “The government has shut down 20 times in the past, and reopened 20 times as well – this time will not be different.”

Corporate News:

Banca Monte dei Paschi di Siena SpA’s purchase of rival Mediobanca SpA could mark the start of a new wave of consolidation for Italy’s banking sector, according to the executive who pulled off the deal. BASF SE may start a buyback of at least €4 billion ($4.7 billion) in shares earlier than planned. Tesco Plc raised its profit forecast for this fiscal year as the supermarket won over more shoppers than anticipated with its competitive pricing and range of store brand products. Stellantis NV is mulling a potential sale of its car-sharing business Free2move as Chief Executive Officer Antonio Filosa looks to turn around the ailing automaker Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.7% as of 10:33 a.m. London time S&P 500 futures rose 0.1% Nasdaq 100 futures rose 0.3% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index rose 1% The MSCI Emerging Markets Index rose 1.3% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1756 The Japanese yen rose 0.3% to 146.66 per dollar The offshore yuan was little changed at 7.1287 per dollar The British pound rose 0.2% to $1.3504 Cryptocurrencies

Bitcoin rose 1% to $118,714.45 Ether rose 1.1% to $4,386.62 Bonds

The yield on 10-year Treasuries was little changed at 4.09% Germany’s 10-year yield declined one basis point to 2.70% Britain’s 10-year yield was little changed at 4.70% Commodities

Brent crude fell 0.4% to $65.10 a barrel Spot gold rose 0.3% to $3,876.11 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from James Hirai.

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