Global equities held near record highs on Monday as the artificial intelligence boom continued to drive investor appetite, offsetting news of fresh attacks in the Gulf that cast doubt on hopes for a reopening of the Strait of Hormuz and pushed oil prices higher.
Brent crude futures rose nearly 3.3% to $94.12 a barrel. The move triggered selling in government bonds, which are already under pressure from growing expectations that interest rates may need to rise to counter any inflationary impact.
AI keeps markets buoyant
S&P 500 futures gained 0.3% and Nasdaq futures rose by the same margin, following record highs posted by the major indices last week. The MSCI All-World index was broadly flat on the day, hovering near record levels, with markets from Tokyo to Seoul trading close to historic highs on the back of strong demand for anything connected to artificial intelligence. The strength of the AI surge was underscored by data showing South Korean exports rose in May at their fastest annual rate in more than four decades, reaching a record $87.75 billion.
Nvidia CEO Jensen Huang opened the Computex trade show in Taiwan on Monday with a keynote address focused on artificial intelligence, presenting the company's latest product initiatives and highlighting Taiwan's central role in the global technology industry.
European equities edged marginally lower during the day, as gains in energy stocks were offset by losses in airline and defence shares.
Bonds and the dollar
Inflationary pressure from rising oil continued to weigh on bond markets. The yield on the US 10-year Treasury rose 1.2 basis points to 4.465%, while the equivalent German yield climbed 5 basis points to 2.98%.
Several Federal Reserve officials are due to speak this week, with key data releases including the ISM manufacturing survey and the May payrolls report on Friday. Markets are expecting jobs growth of 85,000, with the unemployment rate holding steady at 4.3%. A stronger reading could increase the likelihood of a rate rise. Markets are currently pricing in roughly a 50% chance the Fed will need to raise rates before the end of the year, a view that has kept the dollar strong against many currencies, particularly the Japanese yen. The dollar edged up a further 0.1% against the yen to 159.44, just below the 160 level that many analysts consider a threshold that could prompt intervention by Japanese authorities to support the currency.
Separately, a survey published on Monday showed eurozone manufacturing growth lost momentum in May, as demand for goods remained stagnant and supply chain disruptions linked to the war in the Middle East pushed input costs to their highest level in four years.
Source: CNA
