Investor sentiment rebounded yesterday, as optimism about company earnings drove stock markets to new highs and traders interpreted a proposed deal between Iran and Oman as progress towards ending the US-Iran conflict.
Stock markets faltered on Wall Street overnight and during Asian trading hours, as investors turned cautious about AI spending, and some earnings – including chipmakers Sandisk and Advanced Micro Devices and data storage company Western Digital – failed to meet investors’ lofty expectations.
But the rally resumed as European markets opened, with the pan-European STOXX 600 touching an all-time high, driven by media and telecoms stocks. It was last up 0.4 per cent on the day at noon, while London’s FTSE 100 was up 0.3pc, France’s CAC 40 was up 0.8pc and Germany’s DAX was up 0.1pc. Hani Redha, multi-asset portfolio manager at MetLife, said the overnight losses were a natural correction to a rally that was set to continue. Strong earnings and renewed enthusiasm for AI-related tech stocks have pushed Wall Street to record highs in recent sessions.
“This is just part of an overall hangover from a tremendous party we’ve had in the market over the last few trading sessions,” he said.
“We remain pretty constructive… I don’t expect the pace of returns that we saw over the last few weeks, but we should be still in a market environment which is conducive for risk assets, equities in particular.”
Oil prices fell below $80 a barrel after Reuters reported a proposed deal between Iran and Oman to help end the US-Iran conflict, which could give Tehran control over ships entering the Gulf through the Strait of Hormuz. The US did not comment on the proposal, which would be one of the biggest concessions to Iran yet. Still, traders remained cautious, and Brent crude futures were up 0.3pc on the day at $79.70 a barrel while US West Texas Intermediate futures were up 0.2pc at $75.37.
MetLife’s Redha said that although the US-Iran conflict has been one of the main factors influencing markets this year, along with AI spending, the market was becoming less sensitive to it.
“Overall, we’ve been less concerned, I’d say, about what look like negative developments from that region. It is a headwind when oil prices do spike, but we don’t think that they’re going to derail the cycle,” he said.
Euro zone government bond yields were steady, with the benchmark 10-year German yield up by less than one basis point, at 3.1118pc . Nearly €13 billion ($15.00bn) of French government bonds are set to hit the market later in the session. Currency markets were also calm. The euro was down by less than 0.1pc at $1.1540, while the US dollar index was up 0.1pc on the day at 99.767. The Japanese yen was at 157.85 yen per dollar, having declined slightly over the last two sessions and given back some of the gains it reached after the US and Japanese governments intervened in the market on Friday.
A report at 1230 GMT is expected to show jobless claims in the week ended August 1 stood at 202,000, up from 197,000 the week before. The greater focus will be on the official non-farm payrolls figures for July due today.
Federal Reserve Bank of San Francisco President Mary Daly – who is not a voting member of the Federal Open Market Committee – said on Wednesday she was ‘completely supportive’ of the decision last week to hold interest rates steady as the central bank gathers more data about how it should respond to inflation that is well above its 2pc target.
Meanwhile, most Gulf stock markets ended lower yesterday as investors awaited clarity on restoration of shipping through the Strait of Hormuz, while reports of attacks on Saudi tankers in the Red Sea and Gulf of Aden heightened concerns.
Saudi Arabia’s benchmark declined 0.7pc, weighed down by a 4.1pc slide in ACWA Power Co and a 0.7pc drop in Al Rajhi Bank. Oil major Saudi Aramco declined 0.9pc.
Dubai’s main share index retreated 1.5pc, ending four sessions of gains, hit by a 3pc slide in blue-chip developer Emaar Properties. In Abu Dhabi, the index added 0.1pc. Investors are awaiting further diplomatic developments in the region. Hopes for renewed US-Iran talks may lift stocks, but lingering uncertainty could limit gains.
Markets are also watching the Iran-Oman agreement’s impact on Strait of Hormuz traffic amid ongoing supply and security risks, said Daniel Takieddine, co-founder and CEO, Sky Links Capital Group.
The Qatari index dropped 0.7pc, with petrochemical maker Industries Qatar losing 1.4pc. Outside the Gulf, Egypt’s blue-chip index closed flat.
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