Oil rises, bond yields weigh on stocks ~ EconomyLens.com

London (AFP) – Stock markets diverged Monday as investors worried about borrowing costs, while oil prices rose as US President Donald Trump ratcheted up pressure on Iran. Oil prices briefly turned lower following an Iranian media report that said US officials had agreed to suspend sanctions against its crude while talks on ending the war continue. The unconfirmed Tasnim report cited an unnamed source, but analysts said traders seized on the news after Trump warned Tehran on Sunday that time was running out to make a deal.

“Oil markets did dip on the news of peace talk progress, but it was short-lived,” said IG analyst Chris Beauchamp. With no confirmation of the report, as well as Iranian statements on taxing travel through the strait, oil prices quickly began moving higher again. The conflict has led to an effective blockade of the Strait of Hormuz, through which around 20 percent of global oil exports pass in peacetime, and sent oil prices soaring.

Wall Street stocks got a boost from falling oil prices early in the session, but then fell into the red as oil prices switched direction. European stocks ended the day with gains. Traders also have their eye on bond yields, analysts said. Government bond yields have risen worldwide in recent trading sessions as more investors start to question if inflation will begin eroding economic growth while pressuring deficits.

“Global government yields rose sharply heading into the start of this week, as three forces collided: surging oil prices, fading hopes for a Strait of Hormuz resolution, and mounting fiscal concerns especially in the UK and US,” said Michael Wan at MUFG. Rising yields make borrowing more expensive, potentially putting a brake on investments like the billions being poured into the AI rollout.

An AI-fueled rally in tech shares has sent stocks in the US and elsewhere to record highs in recent months, with both the S&P 500 and Nasdaq Composite setting fresh peaks last week. All eyes are on quarterly results from US chip titan Nvidia, set for Wednesday, which will be scrutinized as investors question whether huge spending on AI data centres is justified by potential returns.

In Asia, the Seoul stock market, which has renewed with record highs in recent days thanks to the artificial intelligence spending boom, ended the day 0.3 percent higher. In Tokyo, shares in memory chip maker Kioxia soared 16 percent following stellar quarterly results on Friday. Kioxia, the world’s third-largest producer of NAND flash memory chips, which are used as storage in AI data centres, has seen its stock surge nearly 300 percent over the past year. The company has forecast an eye-watering 1.3 trillion yen ($8.2 billion) in operating profit for April-June, saying it is “riding the large wave of AI demand, which has led to record high revenue and profits.”

– Key figures at around 1530 GMT –

Brent North Sea Crude: UP 1.3 percent at $110.71 a barrel

West Texas Intermediate: UP 1.7 percent at $102.71 a barrel

New York – DOW: DOWN 0.2 percent at 49,423.57 points

New York – S&P 500: DOWN 0.5 percent at 7,371.75

New York – Nasdaq: DOWN 0.9 percent at 25,990.89

London – FTSE 100: UP 1.3 percent at 10,323.75 (close)

Paris – CAC 40: UP 0.4 percent at 7,987.49 (close)

Frankfurt – DAX 30: UP 1.5 percent at 24,307.92 (close)

Tokyo – Nikkei 225: DOWN 1.0 percent at 60,815.95 (close)

Hong Kong – Hang Seng Index: DOWN 1.1 percent at 25,675.18 (close)

Shanghai – Composite: DOWN 0.1 percent at 4,131.53 (close)