(May 11): Asian stocks climbed as traders boosted bets on the AI trade, brushing aside Middle East tensions even after President Donald Trump’s rejection of Iran’s latest peace proposal pushed up oil prices.
MSCI’s Asia Pacific equities gauge climbed as much as 1.1% to an intraday high, before paring some of those gains. South Korea, a poster child for AI investment, jumped as much as 5% to a record. A Bloomberg gauge of Asian chipmakers hit a peak after the Philadelphia Semiconductor Index surged to an all-time high on Friday. Video game maker Nintendo Co fell as much as 10% in Tokyo after warning about higher chip prices.
While investors stayed upbeat on technology, developments in the Middle East weighed on broader markets, with futures for the S&P 500 Index falling 0.2%. Brent rose 3.4% to approach US$105 a barrel as Trump’s rejection effectively prolonged the closure of the Strait of Hormuz. Higher oil prices, which stoked inflation concerns, weighed on bonds, with the Treasury 10-year yield climbing three basis points to 4.39%.
The dollar, the haven of choice during the Middle East conflict, strengthened against all its Group-of-10 peers.
Global equities have erased war-driven losses and climbed to records as investors bet heavy spending on AI will boost corporate profits. Asian shares have benefited as traders pile into chipmakers, seen as the “picks and shovels” of the AI supply chain. The relatively modest moves outside of tech also suggest that traders are pricing in an eventual de-escalation in the Middle East, although the path remains uneven.
“Earnings have been the primary driver of the market since markets decided to move past the peak of the war panic,” said Anna Wu, a cross-asset strategist at Van Eck Associates Corp. “We see markets start to look past current war volatility, in the absence of major escalations.”
See also: Asian stocks under pressure as US inflation rises
Global stocks surged last week, pushing the S&P 500 and Nasdaq 100 to fresh records. A solid US employment report, along with a drumbeat of stronger-than-expected corporate results, has bolstered speculation that the world’s largest economy remains resilient in the face of energy stress triggered by the Iran war.
About 82% of the S&P 500’s companies have beaten first-quarter profit estimates, according to data compiled by Bloomberg.
Robust earnings have helped “ease market concerns that spending was running too far ahead of returns”, said Merrill Tan, executive director of equity research at AR Capital in Singapore. “That message was reinforced by strong results and updates from the broader supply chain.”
See also: Asian stocks decline, led by Korea, oil climbs
Across markets, the success of the momentum strategy — piling into recent winners, effectively — has become a defining feature. Junk bonds and crypto have been drawn in, and one momentum index in equities closed Friday near the highest since the global financial crisis. A gauge of chipmakers jumped 11% in five sessions.
Barclays plc strategists say the trade has reached extremes that historically foreshadowed selloffs. Valuations for high-momentum stocks are stretched and positioning is among the highest in recent years, based on prime brokerage data, Goldman Sachs Group Inc’s trading desk wrote last week.
Beyond the war, traders have a lot to parse this week with the scheduled meeting between Trump and Chinese President Xi Jinping and US inflation data, which will offer clues on where interest rates are headed.
In currencies, the pound weakened ahead of a speech by UK Prime Minister Keir Starmer to forestall an immediate challenge to his job. Starmer will lay out a plan to turn the governing party’s fortunes around, including a commitment to take the UK closer to the European Union a decade after the Brexit vote.
“The pressure on Starmer to resign has increased,” Elias Haddad, global head of markets strategy at Brown Brothers Harriman, wrote in a note to clients. “Regardless, the risk the Labour government pivots further leftwards has diminished, which is supportive of GBP and gilts.”
Some of the main moves in markets:
Stocks
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- S&P 500 futures fell 0.2% as of 10.35am Tokyo time
- Nikkei 225 futures (OSE) fell 0.1%
- Japan’s Topix rose 0.2%
- Australia’s S&P/ASX 200 fell 0.8%
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite rose 0.4%
- Euro Stoxx 50 futures were unchanged
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to US$1.1766
- The Japanese yen fell 0.2% to 156.99 per dollar
- The offshore yuan was little changed at 6.7937 per dollar
Cryptocurrencies
- Bitcoin rose 1% to US$81,533.95
- Ether rose 1.4% to US$2,360.52
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.39%
- Japan’s 10-year yield was unchanged at 2.470%
- Australia’s 10-year yield was little changed at 4.98%
Commodities
- West Texas Intermediate crude rose 3.9% to US$99.17 a barrel
- Spot gold fell 0.4% to US$4,697.32 an ounce
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