Global markets reached new highs amid rising interest in the artificial intelligence sector and expectations of a potential US-Iran deal that could unlock oil shipments through the Strait of Hormuz. Equities also found support from strong corporate earnings and signs of easing pressure from rising bond yields and energy prices.
S&P 500 futures climbed by 0.3%, hitting a fresh all-time high, while Europe's Stoxx 600 and the MSCI All Country World Index also notched record levels. Investors are rotating back into risk assets amid growing interest in semiconductor manufacturers, a sector directly tied to the AI boom.
Brent crude remained around $80 per barrel after sliding by 5.3% on Tuesday, as the United States moves closer to an agreement on the Strait of Hormuz. An announcement on a deal between Washington, Tehran, and Oman regarding the resumption of oil shipments through the strait is expected on Wednesday.
Later, Brent rose by 0.9% to $80.11 per barrel. Treasuries held steady, with the 10-year yield virtually unchanged at 4.61%, while gold gained amid reduced expectations of interest rate hikes. Gold prices rose by 2.2% to approximately $4,165 per ounce, with spot gold advancing by 2.1% to $4,162.99 per ounce.
According to Mohit Kumar, strategist at Jefferies International, markets tend to focus on oil prices amid geopolitical uncertainty. If they return to the $75–80 range, investors can concentrate on fundamentals, which remain resilient. Earnings are stable, liquidity is ample, and clear positioning creates a favorable environment for risk assets, he added.
Results from major technology companies and the recent correction have made valuations more reasonable and restored confidence following volatility in AI-related stocks, which last month led to losses at several hedge funds.
Nevertheless, caution remained: SpaceX shares fell by 7.5% in after-hours trading after the company reported higher-than-expected expenses related to its AI business. Advanced Micro Devices Inc. shares declined by roughly 9% following a weak sales forecast.
As Andrea Gabellone, head of global equities at KBC Securities, noted, SpaceX had a successful quarter, but the company is refraining from investing for now, given the complex structure of lock-up agreement expirations, which makes them vulnerable to technical fluctuations, as well as current positions that are heavily skewed toward short selling.
The MSCI World Semiconductor Index fell by more than 20% from its June peak amid concerns over the sustainability of AI investment growth and progress in advanced chip development in China. However, the index has since recovered by 15%, bringing its year-to-date gain to 42%. Earlier, the US semiconductor chip price index posted its strongest four-day rally since 2020.
According to Roland Kaloyan, head of European equity strategy at Societe Generale, there is significant dispersion in AI-related stocks among semiconductor companies and major investment funds. This creates challenges for equity portfolio managers who cannot invest in indices and are forced to make difficult decisions when selecting individual stocks.
Bloomberg strategists point to important shifts in investment structure: "The broader shift away from pure hardware exposure has already reshaped equity performance globally. If the first phase of the AI rally was defined by chips and optical equipment, the next phase may increasingly belong to the platforms putting the technology to work," Andre de Silva, strategist at Markets Live, noted.
Charu Chanana, chief investment strategist at Saxo Markets in Singapore, highlights three reasons for the recent sell-off: concerns over AI spending, rising bond yields, and higher oil prices. However, she noted that these factors are fading. Strong corporate earnings are reinforcing confidence in sustained AI demand, while lower oil prices and bond yields are reducing pressure on market valuations.
Among individual European leaders, Siemens Energy AG stood out, rising by more than 3% on increased demand for gas turbines and grid equipment, which boosted the company's profitability.
Glencore Plc shares rose by 4% following a report of significant profit growth. Sandoz Group's second-quarter net revenue increased by 7%, in line with forecasts, driven by strong sales.
The dollar, previously seen as a safe haven during the Middle East conflict, weakened against most G10 currencies. The Bloomberg Dollar Spot Index fell by 0.1%, extending its decline to a third consecutive day. Gold, silver, and platinum prices rose, as non-yielding precious metals benefited from the absence of rate hikes.
Equities:– Stoxx Europe 600 rose by 0.3% as of 8:35 a.m. London time.– S&P 500 futures gained 0.3%.– Nasdaq 100 futures remained largely unchanged.– Dow Jones futures rose by 0.2%.– MSCI Asia Pacific climbed by 2.1%.– MSCI Emerging Markets also rose 2.1%.
Currencies:– Bloomberg Dollar Spot Index held steady.– Euro: $1.1536.– Japanese yen: 157.71 per dollar.– Offshore yuan: 6.7472 per dollar.–British pound: $1.3459.
Cryptocurrencies:– Bitcoin lost 0.4% to $64,019.98.– Ether declined by 0.7% to $1,862.77.
Bonds:– 10-year Treasury yield stood at 4.61%.– 10-year German Bund yield fell by one basis point to 3.10%.– 10-year UK gilt yield slid by one basis point to 4.89%.
Commodities:– Brent crude: $80.11 per barrel (up 0.9%).– Spot gold: $4,162.99 per ounce (up 2.1%).
The market remains driven by two key themes: AI dynamics and geopolitics surrounding the Strait of Hormuz. Investors will closely monitor developments in US-Iran negotiations and upcoming corporate reports, which are likely to set the tone for further index movements.
InstaSpot analytical reviews will make you fully aware of market trends! Being an InstaSpot client, you are provided with a large number of free services for efficient trading.
