MSCI’s Asian equities gauge rose 1%, with South Korea, a poster child for AI investment, jumping as much as 5% to a record. Momentum in the sector remained strong, with the Philadelphia Semiconductor Index surging to an all-time high on Friday. Nintendo Co., however, fell 9% in Tokyo after its forecast missed estimates.
While investors stayed upbeat on tech, weekend developments in the Middle East weighed on broader markets. Brent rose 3.6% to almost $105 a barrel and futures for the S&P 500 Index fell 0.1% after Trump’s rejection of Iran’s proposal, prolonging the effective closure of the Strait of Hormuz. Higher oil prices stoked concerns of inflation, weighing on bonds, with the 10-year Treasury yield rising three basis points to 4.39%.
The dollar, the haven of choice during the Middle East conflict, strengthened against all its Group-of-10 peers.
Global equities have erased war-driven losses and climbed to records as investors bet heavy spending on AI will boost corporate profits. Asian shares have benefited as traders pile into chipmakers, seen as the “picks and shovels” of the AI supply chain. The relatively modest moves outside of tech also suggest that traders are pricing in an eventual de-escalation in the Middle East, although the path may be uneven.
“Earnings have been the primary driver of the market since markets decided to move past the peak of the war panic,” said Anna Wu, a cross-asset strategist at Van Eck Associates Corp. “We see markets start to look past current war volatility, in the absence of major escalations.”Iran offered to transfer some of its stockpile of highly enriched uranium to a third country in its response to an earlier US proposal to end 10 weeks of war, but rejected the idea of dismantling its nuclear facilities, the Wall Street Journal reported. Iran disputed the report, according to its semi-official news agency Tasnim. Trump called the Iranian response “TOTALLY UNACCEPTABLE”. Across markets, the success of the momentum strategy — piling into recent winners, effectively — has become a defining feature. Junk bonds and crypto have also been drawn in.
Barclays Plc strategists say the trade has reached extremes that historically foreshadowed selloffs. At Goldman Sachs Group Inc., the trading desk wrote last week that valuations for high-momentum stocks are stretched and positioning is among the highest in recent years, based on prime brokerage data.
