(June 1): Stocks rose to a record as investors doubled down on the artificial intelligence (AI) trade that’s powered equities to all-time highs. Oil climbed as a US-Iran ceasefire deal remained elusive.
The MSCI All Country World Index, the broadest measure of global equities, advanced 0.2%, with Asian shares climbing 1.1% to an all-time high. Gauges in South Korea and Taiwan — bellwethers for AI investments — and the Nikkei in Japan all hit records.
SoftBank Group Corp, whose investments include chip designer Arm Holdings plc and ChatGPT maker OpenAI, surged as much as 10%, putting it on track to become Japan’s most valuable company. Sentiment was further buoyed by a 0.5% gain in Nasdaq 100 Index futures after Wall Street benchmarks closed at records on Friday.
Weighing on the mood, however, was a rally in oil prices. Brent climbed over US$93 a barrel as Middle East tensions remained elevated and efforts to reopen the Strait of Hormuz showed little progress. That sent Treasuries lower across the curve. The dollar, the haven of choice since the US-Israel war on Iran started, strengthened for the first time in three sessions.
Relentless enthusiasm for the AI trade continued to propel global equities toward record highs, helping lift South Korea’s market to the top of global performance rankings this year. Still, oil’s rebound on Monday after its steepest monthly drop in more than six years is reviving concerns about energy-driven inflation and could complicate the recent recovery in global bond markets.
“The AI trade remains then firmly in focus, although it hardly needs additional attention given the extraordinary price action,” wrote Chris Weston, head of research at Pepperstone Group.
See also: S&P 500 powers historic weekly run on US-Iran bets
Offsetting war worries has been unbounded enthusiasm for sectors touched by the AI trade.
The Philadelphia Stock Exchange Semiconductor Index, or SOX, is on pace for its best quarter ever after soaring 69% in the past two months. Chips are the best-performing sector in the S&P 500 this year by a wide margin. Micron Technology Inc’s shares have more than tripled this year. In Asia, SK Hynix Inc has soared 260%, and Samsung Electronics Co is up over 180%.
If anything threatens the upward arc it’s the velocity of the advance itself, according to Laurent Lamagnere, deputy CEO at Alphavalue in Paris.
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“There’s a gradual realisation across the market that something’s got to give in the AI economy: there’s no way that these massive investments will pay out for every actor,” Lamagnere added. “A correction at one stage would make sense.”
In other corners of the market, the yield on the benchmark 10-year Treasury climbed three basis points to 4.47%. Yields on government bonds of similar maturity in Australia and Japan also climbed. Futures of similar-tenor debt in France and Germany declined.
Gold fluctuated to trade around US$4,530 an ounce.
During the weekend, an Iranian ballistic missile strike on a Kuwaiti air base caused minor injuries to several Americans, while Israel stepped up its offensive against the Tehran-backed Hezbollah in Lebanon.
Meanwhile, the US and Iran exchanged messages seeking amendments to a draft agreement that would extend the ceasefire and reopen the Strait of Hormuz, though it remained unclear whether talks were making much progress.
“Negotiations between the US and Iran remain an outstanding concern and a source of potential volatility going forward,” said Kyle Rodda, senior analyst at Capital.com. “The risk is the price has been misled by propaganda as the Trump administration sells a looming deal but, to this point, the Iranians remain reticent on the matter.”
On Friday, US President Donald Trump posted on social media he was ready to make a “final determination” on a preliminary agreement to extend the ceasefire. Hours later, he left the Situation Room meeting without any decision being made, the New York Times reported.
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Amendments to the deal continue to be proposed by both sides, though both the US and Iran might ultimately reject the changes and the deal would collapse, the semi-official Tasnim news agency reported Sunday.
“There are likely going to be more setbacks, but the market has already priced an agreement in Iran,” Patrik Lang, chief investment strategist at Geneva-based Global Gate Asset Management. “I wouldn’t expect big market moves, except maybe lower oil, once the deal is announced.”
Corporate news:
- Berkshire Hathaway Inc will acquire Taylor Morrison Home Corp in an all-cash deal worth about US$6.8 billion, the first major purchase under chief executive Greg Abel and a vote of confidence in the US housing market.
- SoftBank Group Corp is poised to overtake Toyota Motor Corp as Japan’s most valuable company, marking a milestone for the global artificial intelligence boom and a dramatic reshuffling of the country’s corporate hierarchy.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 11.38am Tokyo time
- Japan’s Topix fell 0.2%
- Australia’s S&P/ASX 200 fell 0.2%
- Hong Kong’s Hang Seng rose 1.2%
- The Shanghai Composite rose 0.4%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.1% to US$1.1646
- The Japanese yen fell 0.1% to 159.47 per dollar
- The offshore yuan was little changed at 6.7664 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to US$73,423.85
- Ether fell 0.2% to US$2,000.96
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.47%
- Japan’s 10-year yield advanced four basis points to 2.690%
- Australia’s 10-year yield advanced five basis points to 4.88%
Commodities
- West Texas Intermediate crude rose 2.7% to US$89.70 a barrel
- Spot gold fell 0.3% to US$4,528.21 an ounce
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