Global stock markets experienced a mixed day but leaned towards gains, primarily driven by a rebound in chipmakers and AI-infrastructure stocks. This resurgence was fueled by short covering ahead of critical earnings reports from megacap technology companies, starting with Alphabet on Wednesday. The iShares Semiconductor ETF (SOXX) saw a gain of 2%, with individual chip stocks like Western Digital (WDC) increasing over 4%, and Intel (INTC), Advanced Micro Devices (AMD), Seagate Technology Holdings Plc (STX), and Sandisk (SNDK) all rising by more than 3%. Other significant contributors included Applied Materials (AMAT), Marvell Technology (MRVL), Microchip Technology (MCHP), and Texas Instruments (TXN), which were all up by more than 2%. Optimism around strong Q2 earnings, projected to increase by 23% and with AI spending accounting for most of the growth, further supported the market.
However, the overall market upside was somewhat limited by weakness in software stocks and ongoing geopolitical tensions. Crude oil prices initially surged, with Brent crude climbing above $90 a barrel for the first time in over a month, due to the US military's continued attacks against Iran and Iran's retaliatory strikes, which disrupted traffic through the Strait of Hormuz. WTI crude oil (CLQ26) prices reached a 5-week high before falling back after Iran indicated willingness to engage in diplomacy with Qatar and Pakistan mediating a proposed 10-day cessation of strikes.
Asian markets displayed a varied performance. South Korea's chip-heavy Kospi lost a further 4.2% after a significant 9% dive the previous week, while MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3%. Chinese blue chips bucked the trend with a 1.4% gain. Japan's Nikkei-225 Stock Average was closed for the Marine Day holiday, having shed 6.4% last week. On the other hand, futures on the Dow Jones Industrial Average rose 0.2%, S&P 500 futures rose 0.3%, and Nasdaq 100 futures also rose 0.2%.
The prospect of rising interest rates also loomed over the markets. Futures imply a 60% chance of a US Federal Reserve rate hike as early as September, pushing yields on 30-year Treasuries above the 5.0% barrier. This could draw funds away from equities towards fixed income. The European Central Bank is expected to hold rates at 2.25% after a June hike, but the rising fuel costs are reviving inflation worries, contributing to market unsettledness.
