London (AFP) – Stock markets rebounded on Wednesday from the previous day’s rout of technology shares, caused by concerns over massive AI spending and rising borrowing costs. Oil prices fell further as shipping traffic through the Strait of Hormuz picked up, with Brent crude edging below $75 a barrel for the first time since the start of the Middle East war. The US benchmark West Texas Intermediate fell below $70, also a first since the Mideast war began in late February, as crude prices return to near pre-war levels. But investors remain uncertain about any future Iranian fees for transiting the crucial Gulf strait, and oil demand is likely to remain strong as countries rebuild strategic reserves unloaded during the crisis.
“The carnage continues in oil prices,” said Chris Beauchamp, chief market analyst at online trading platform IG. “This delivers relief for consumers around the globe, assuming the oil industry can scramble to fill the gap left by months of disruption,” he added. Wall Street was higher in late morning trading, following advances across most equity markets in Asia and Europe. In Asia, Seoul’s Kospi index added more than three percent after a 10 percent collapse Tuesday led by losses for chip giants SK hynix and Samsung after their recent string of record highs. There were also gains in Hong Kong and Shanghai Wednesday, though Tokyo once more ended lower.
“The global tech sell-off appears to have started to stabilize, but investors remain super-cautious, nervous that high valuations could be chipped away at again,” said Susannah Streeter, chief investment strategist at Wealth Club. While no specific catalyst was blamed for the selling, analysts cited questions over when firms will see a return on the trillions that have been invested in all things AI, and the prospect of a US interest rate hike that is boosting the dollar. SK hynix announced meanwhile that it planned to raise $29 billion through a listing on Wall Street’s tech-heavy Nasdaq index. Eyes turn later in the day to the release of earnings from US chipmaker Micron Technology, which will provide fresh ideas about the state of demand in the sector and whether the AI rally still has legs.
“The next-stage debate on AI investing is not whether the theme is real, but whether the scale of investment will ultimately generate the returns that investors expect,” said Christoffer Enemaerke at RBC BlueBay Asset Management. European stock markets mostly rose, though Frankfurt was pulled down by a 19-percent fall in German defense giant Rheinmetall after Berlin scrapped a multibillion-euro plan to build six new frigates for its navy.
On currency markets, the dollar continued its advance spurred by last week’s Federal Reserve meeting, when new chairman Kevin Warsh signaled that fighting inflation spurred by soaring oil and gas prices would be his priority. Traders took that to mean interest rate hikes could be on the cards as soon as September, spurring demand for the greenback as US Treasury yields become more attractive. “The dollar has climbed to a seven-month high as investors seek safety amid equity volatility,” said Patrick Munnelly, market strategist at Tickmill Group. He noted that investors will be looking at US inflation data Thursday for clues as to the timing of any rate increase.
But the prospect of higher US rates cut into gold’s status as a safe-haven investment, with its price falling below $4,000 for the first time since November. The precious metal surged in January to a record high of over $5,600 as US President Donald Trump ramped up geopolitical tensions with his threatened military strike on Iran.
– Key figures around 1530 GMT –
Brent North Sea Crude: DOWN 4.3 percent at $73.53 a barrel
West Texas Intermediate: DOWN 3.4 percent at $69.85 a barrel
New York – Dow: UP 1.1 percent at 52,233.58 points
New York – S&P 500: UP 0.8 percent at 7,423.94
New York – Nasdaq Composite: UP 0.8 percent at 25,798.12
London – FTSE 100: UP 0.3 percent at 10,461.63 (close)
Paris – CAC 40: UP 0.5 percent at 8,385.49 (close)
Frankfurt – DAX: DOWN 0.6 percent at 24,740.36 (close)
Seoul – Kospi: UP 3.3 percent at 8,471.02 (close)
Tokyo – Nikkei 225: DOWN 0.9 percent at 69,174.97 (close)
Hong Kong – Hang Seng Index: UP 0.3 percent at 23,412.18 (close)
Shanghai – Composite: UP 0.1 percent at 4,110.81 (close)
Euro/dollar: DOWN at $1.1357 from $1.1383 on Tuesday
Pound/dollar: DOWN at $1.3163 from $1.3196
Dollar/yen: UP at 161.79 yen from 161.52 yen
Euro/pound: UP at 86.27 pence from 86.23 pence
© 2024 AFP
