US Stock Futures Advance on Iran, Oil Erases Gain: Markets Wrap
(Bloomberg) — US equity-index futures advanced following reports that the US and Iran had backed away from a fresh escalation of their conflict, easing concerns over the fragile ceasefire underpinning peace talks.
Contracts for the S&P 500 Index and the Nasdaq 100 both rose at least 0.7%. The rally came after Axios reported the US and Iran agreed to halt strikes and meet this week in Qatar to resume talks over the Strait of Hormuz and other issues to end the war, citing an unidentified US official. European stock futures also climbed.
Brent crude oil erased an earlier gain to trade little changed at about $72 a barrel. The Middle East conflict had intensified since Thursday, with Iran striking a container ship, a vessel carrying Qatari oil, and military bases in Kuwait and Bahrain, prompting multiple US retaliatory strikes.
South Korea’s Kospi index swung to a gain after the nation unveiled an ambitious plan aimed at cementing its status as a technological powerhouse. Samsung Group and SK Group plan to build two chipmaking plants apiece for 800 trillion won, the country’s industry minister said Monday.
MSCI’s Asia Pacific equity benchmark was little changed with investors rotating away from heavily weighted tech hardware shares toward other sectors.
Hopes for a lasting peace between the US and Iran and optimism over the tech trade have put global stocks on track for their best quarter since 2020. While a strong first half is typically a good sign for the rest of the year, investors are grappling with a series of risks, from the durability of the artificial intelligence trade to the threat of rising interest rates as well as accelerating government spending.
“The stock market seems to believe that President Trump has no choice but to make concessions as the midterm elections approach,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab. “Investors see the exchange of attacks between the US and Iran as temporary and do not believe the situation will escalate into another war.”
MSCI’s All Country World Index fell 2.1% last week as Wall Street traders kept driving a rotation out of high-profile chipmakers and into a broader category of companies.
While the S&P 500 closed little changed on Friday, most of its shares rose as signs of economic resilience fueled bets that corporate America will keep powering ahead. The benchmark’s equal-weighted version — which strips out market-value biases — reached record highs.
“The money seems to be going anywhere but technology,” Kaia Parv, a market strategist at First Degree Global Asset Management in Singapore, said in an interview with Bloomberg Television.
What Bloomberg Strategists Say…
“An index of implied volatility for South Korean stocks hit a record Monday. With the country’s equities struggling to regain the momentum that carried it to a series of unprecedented highs this quarter, the heat coming from the options market signals concerns that the best of this year’s rally is behind us for South Korea’s world-beating equities.”
— Garfield Reynolds, Markets Live team leader. For more on the analysis, click here.
Elsewhere, the dollar was mixed against its major peers, while gold dropped almost 1% to $4,050 an ounce. Treasuries were a touch weaker, with the yield on the benchmark 10-year note rising one basis point to 4.38%.
This week, traders will be focused on the annual central banker meeting at Sintra, Portugal with speakers including Federal Reserve Chair Kevin Warsh. A series of US jobs reports, including nonfarm payrolls, will also be in focus as expectations mount a resilient US economy and inflation pressures may spur the Fed to raise interest rates as early as September.
While Warsh may walk back some of his hawkish rhetoric at Sintra and weigh the dollar, it’s likely “to grind higher in coming weeks because of the ‘US exceptionalism’ narrative,” Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients.
There may be other concerns too. A sharp correction in the AI-driven rally, inflation and fiscal stress are among the most alarming threats to global prosperity at present, Bank for International Settlements warned in its annual report Sunday. Federal Reserve Bank of Richmond President Tom Barkin also warned that inflation is “too high.”
In its annual report published on Sunday, the Basel-based institution cited those on a list of “pressure points” that currently “demand attention,” with underlying financial vulnerabilities lurking that could amplify any shock.
“The global economy remains caught in the crosscurrents of progress and peril,” Basel officials said in the report. “Resilience is being increasingly tested and strained.”
Corporate News:
Toyota Motor Corp.’s posted another drop in global sales, hit by Middle East disruptions and tough competition in China that pushed the world’s top-selling automaker into a fourth straight month of declines. An heir to Ray-Ban billionaire Leonardo Del Vecchio proposed to sell the family’s stakes in Italian financial firms to end a four-year fight over one of Italy’s biggest fortunes. Google has placed limits on Meta Platforms Inc.’s use of its Gemini artificial intelligence models because it could not provide as much computing capacity as the social media company wanted, according to the Financial Times. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.7% as of 2:54 p.m. Tokyo time Nikkei 225 futures (OSE) fell 0.3% Japan’s Topix was little changed Australia’s S&P/ASX 200 rose 0.6% Hong Kong’s Hang Seng rose 2% The Shanghai Composite rose 0.9% Euro Stoxx 50 futures rose 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1394 The Japanese yen was little changed at 161.79 per dollar The offshore yuan was little changed at 6.7991 per dollar Cryptocurrencies
Bitcoin rose 0.5% to $59,892.68 Ether rose 0.4% to $1,578.15 Bonds
The yield on 10-year Treasuries was little changed at 4.37% Japan’s 10-year yield advanced 2.5 basis points to 2.635% Australia’s 10-year yield advanced three basis points to 4.75% Commodities
West Texas Intermediate crude rose 0.5% to $69.58 a barrel Spot gold fell 0.8% to $4,054.13 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Momoka Yokoyama, Bing Hong Lok and Bernadette Toh.
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