New York (AFP) – Oil prices eased and stocks wavered on Tuesday, with investors tracking a potential deal between the United States and Iran, as rising bond yields sounded the alarm on interest rate expectations. The yield on 30-year US Treasury bonds hit its highest level since the global financial crisis 19 years ago, reaching as high as 5.19 percent during the session, compared to around 4.6 percent before the US-Israel war on Iran began in February. The move indicated growing market unease over inflation, energy prices, and fiscal worries.
US President Donald Trump stated that he had held off on a major new assault against Tehran, as he saw hope for securing an agreement to end the conflict. Stocks did not receive much of a boost from Trump’s announcement; Wall Street’s major indices closed in the red, and European indices ended the day mixed. “Investors are showing relief that tensions haven’t escalated,” said Russ Mould, investment director at AJ Bell. However, he added that “oil prices remain at high enough levels to weigh on the global economy.” Brent crude, the international benchmark, hovered around $110 a barrel—down from Monday’s prices but still up more than 50 percent since the outbreak of the Middle East war.
Investors are also nervously eyeing rising yields for government bonds in major economies, including the United States and Japan, indicating that investors are selling amid fears inflation will hinder economic growth. “It’s really just inflation worries, particularly given that the Strait of Hormuz is still closed,” said Sam Burns of Mill Street Research, highlighting US inflation data from last week that reached multi-year highs, causing concern among investors. Despite this, with markets not expecting the US Federal Reserve to hike rates until at least next year, Burns suggested that bond yields would have a ceiling on how high they can go.
The divergence between bond investor worries and stock market enthusiasm for strong corporate earnings and the AI-fueled tech boom is increasingly prompting caution. Higher bond yields signal expectations of higher borrowing costs, which could make it challenging for many firms, particularly those needing to finance significant investments into AI. Investors are now looking ahead to Wednesday’s quarterly results from US chip titan Nvidia to determine whether the vast spending on AI data centers is justified by potential returns. “The chip giant’s outlook for sales and its assessment of the uptake of enterprise AI will be vital for the next stage of the tech trade,” noted Kathleen Brooks at XTB.
Tech stocks in Asia retreated, reflecting a slump in Wall Street on Monday. In South Korea, artificial intelligence heavyweight SK Hynix slid more than five percent, while Samsung Electronics fell by around one percent. The Hong Kong and Shanghai stock markets advanced, while Tokyo’s Nikkei 225 closed modestly lower, despite Japan reporting a 0.5 percent expansion in gross domestic product in the first quarter, exceeding market forecasts.
In other corporate news, shares in Standard Chartered slid 2.2 percent after the British bank announced plans to cut thousands of jobs by deploying AI to replace employees in various administrative roles.
**Key figures at around 2000 GMT:**
Brent North Sea Crude: DOWN 0.7 percent at $111.28 a barrel
West Texas Intermediate: DOWN 0.8 percent at $107.77 a barrel
New York – DOW: DOWN 0.7 percent at 49,363.88 points (close)
New York – S&P 500: DOWN 0.7 percent at 7,353.61 (close)
New York – Nasdaq Composite: DOWN 0.8 percent at 25,870.71
London – FTSE 100: UP less than 0.1 percent at 10,330.55 (close)
Paris – CAC 40: DOWN less than 0.1 percent at 7,981.76 (close)
Frankfurt – DAX 30: UP 0.4 percent at 24,400.65 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 60,550.59 (close)
Hong Kong – Hang Seng Index: UP 0.5 percent at 25,797.85 (close)
Shanghai – Composite: UP 0.9 percent at 4,169.54 (close)
Euro/dollar: DOWN at $1.1606 from $1.1650 on Monday
Pound/dollar: DOWN at $1.3401 from $1.3422
Euro/pound: DOWN at 86.60 from 86.77 pence
Dollar/yen: UP at 159.04 from 158.93 yen.
© 2024 AFP
