(June 9): A rebound in equities that began on Wall Street extended into Asia on Tuesday, as cheaper valuations for artificial intelligence (AI) shares lured investors. Crude oil declined as tensions in the Middle East eased.
MSCI’s Asia-Pacific equities gauge climbed 2.5%, after dropping the most since March on Monday. South Korea’s Kospi rose as much as 8% as dip buyers returned to the AI trade, with chip heavyweight SK Hynix Inc jumping 11%. The gains followed a recovery in US stocks, with the Nasdaq 100 Index rising 1.6% and a gauge of semiconductors climbing over 5%.
Futures indicated further gains for the US benchmarks, while Europe was set for a tepid start.
Optimism towards the tech sector remained firm as investors found fresh reasons to bet on the AI theme. SpaceX’s initial public offering was oversubscribed, Nvidia Corp and SK Hynix sealed a pact to develop chips and Apple Inc’s AI-led reboot set the stage for new devices.
Brent crude fell 0.8% to about US$93.50 ($120.20) a barrel after Iran and Israel pledged to ease strikes that threatened the peace talks in the Middle East. A Bloomberg gauge of the dollar also edged lower.
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After a brief interruption to the rally that propelled markets to record highs, investors are making a cautious return to equities on expectations the bull market still has room to run, driven by corporate profits. Sentiment has also improved as geopolitical tensions ease, reducing concerns over oil-driven inflation and the prospect of higher central bank interest rates.
“A correction was inevitable and ultimately healthy if this bull market is going to extend into year end,” said Mike Wilson, Morgan Stanley’s chief US equity strategist. Wilson maintained his constructive outlook, supported by earnings and strong economic data.
In other corners of the market, gold steadied around US$4,340 an ounce. Citigroup Inc lowered its three-month target for bullion to US$4,000 an ounce, citing the likelihood of a US Federal Reserve (Fed) rate hike this year.
See also: Oil gains, Asian stocks fall as US strikes Iran
Treasuries were little changed, with the yield on the benchmark 10-year holding at 4.56%. Similar-maturity government bonds in Japan and Australia declined.
Meanwhile the bull run has led to diverse views in the market. Investors should exercise caution regarding US stocks as an increasing number of “bear market signposts” point to an approaching top, according to Bank of America Securities.
Citigroup strategists led by Scott Chronert, however, raised their year-end target for the S&P 500 after a “big step up” in earnings expectations.
“We do not expect investors to lose confidence in the AI outlook,” said Mark Haefele at UBS Global Wealth Management. “Although tech stocks have come under pressure in recent days amid concerns about whether expectations can be met, business fundamentals remain strong.”
Meanwhile, Iran and Israel agreed to ease strikes against each other after a flare-up in violence threatened to derail peace negotiations and led US President Donald Trump to appeal for de-escalation.
Attention remains focused on whether energy flows will resume meaningfully via the Strait of Hormuz. A trickle of commercial shipping returned to the waterway over the weekend, even as the risks prompted some vessels to travel with their digital transponders switched off.
Oil prices and their impact on inflation are key factors traders are watching after last Friday’s blowout payrolls report reinforced bets on a rate hike.
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The May consumer price index due on Wednesday is expected to jump by 4.2% from a year earlier — the highest rate in more than three years. But the core consumer price index (CPI) is seen cooling slightly on a monthly basis — potentially providing a welcome signal to Fed officials.
“A hotter-than-expected CPI print would undoubtedly add to mounting fears of a Fed rate hike before year end,” Tony Sycamore, an analyst at IG in Sydney, wrote in a note. “This scenario would provide fresh support for the US dollar while putting renewed downward pressure on US equities.”
Corporate news:
- OpenAI, the maker of ChatGPT, filed confidentially for an IPO, joining AI rivals in tapping public markets to fund ambitious growth plans.
- SpaceX’s initial public offering is well oversubscribed, according to people familiar with the matter, as demand builds for a potentially record-setting debut.
- The Pentagon accused some of China’s biggest companies including Alibaba Group Holding Ltd, Baidu Inc and BYD Co of supporting the Chinese military.
- A federal judge struck down a US$100,000 fee US President Donald Trump ordered for H-1B visa applications, providing a reprieve for US technology companies.
Some of the main moves in markets:
Stocks
- S&P 500 futures were up 0.2% as of 2pm Tokyo time on Tuesday
- Japan’s Topix rose 1.1%
- Australia’s S&P/ASX 200 fell 0.2%
- Hong Kong’s Hang Seng was little changed
- The Shanghai Composite rose 0.8%
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at US$1.1545
- The Japanese yen was little changed at 160.19 per dollar
- The offshore yuan rose 0.1% to 6.7763 per dollar
Cryptocurrencies
- Bitcoin fell 0.4% to US$63,219.06
- Ether fell 0.2% to US$1,685.74
Bonds
- The yield on 10-year Treasuries was little changed at 4.56%
- Japan’s 10-year yield declined one basis point to 2.705%
- Australia’s 10-year yield advanced two basis points to 4.93%
Commodities
- West Texas Intermediate crude fell 1.1% to US$90.31 a barrel
- Spot gold rose 0.1% to US$4,335.03 an ounce
Uploaded by Tham Yek Lee
