Global equity markets rallied, driven by renewed investor enthusiasm for technology shares, even as tensions flared in the Middle East with military strikes between the U.S. and Iran. The MSCI gauge of global stocks rose by 0.72%. U.S. markets saw significant gains, with the Dow Jones Industrial Average climbing 0.27%, the S&P 500 rising 0.81%, and the Nasdaq Composite jumping 1.3%. This surge in tech stocks, especially chipmakers, helped investors overlook geopolitical worries.
Chipmakers were a major catalyst for the market's positive performance. News that China might grant domestic AI firms limited access to Nvidia's H200 chips boosted sentiment. Additionally, SK Hynix's forthcoming $28 billion U.S. share listing was reportedly more than seven times oversubscribed, with plans to price American Depositary Receipts at $149 each, raising approximately $26.5 billion. Micron Technology's announcement of plans to invest over $250 billion in the U.S. through 2035 to meet AI demand further fueled the rally, with its stock jumping 4.5%. Applied Materials climbed 3.2% and Sandisk surged 7.6%. The Philadelphia SE Semiconductor index experienced a second consecutive day of gains, rising 3%.
Oil prices retreated despite the renewed Middle East conflict, with U.S. crude closing down 2.3% at $71.83 a barrel and Brent falling 2.5% to $76.05 per barrel. This easing of oil prices helped alleviate inflation concerns, which in turn lessened pressure on the Federal Reserve to raise interest rates. Yields on benchmark 10-year U.S. Treasuries also ticked lower to 4.547% from 4.56%. The market's implied probability of a Fed rate hike this year increased to about 87% following comments from New York Fed President John Williams and the June FOMC minutes, which showed growing concerns about inflation. However, the minutes were perceived as less hawkish than feared, suggesting the central bank was not rushing towards an immediate July hike.
Economic data released included a fall in unemployment claims last week, indicating stability in the U.S. labor market. However, a separate report showed an unexpected dip in home sales by 2.4% last month to a seasonally adjusted annual rate of 4.09 million units, despite economists forecasting a rise to 4.20 million units. This decline was attributed to tight inventory and record-high house prices, highlighting affordability challenges for potential homeowners.
