Investors renew bets on the AI trade with focus on the possible reopening of the Strait of Hormuz
ASIAN stocks tracked Wall Street higher after optimism over a possible interim deal between Washington and Teheran eased concerns about energy supplies while oil extended its losses.
MSCI’s Asia Pacific equities gauge climbed 1.1 per cent, led by a 3.5 per cent jump in South Korean shares.
Samsung Electronics and SK Hynix both rallied more than 4 per cent in Seoul after a US semiconductor gauge posted its strongest four-day rally since 2020, as investors renewed bets on the artificial intelligence trade.
Among the main moves across markets, S&P 500 futures rose 0.2 per cent as at 9.52 am Tokyo time. Hang Seng futures rose 0.3 per cent, Japan’s Topix rose 1.5 per cent and Australia’s S&P/ASX 200 rose 0.2 per cent.
Australian shares hit an all-time high.
Futures contracts for the S&P 500 Index edged higher in early Asian trading after the benchmark closed at a record high on Tuesday (Aug 4). Caution lingered, however, as SpaceX shares fell 7 per cent in extended trading after the company projected higher-than-expected spending on its AI business.
Advanced Micro Devices also slid 9 per cent after an underwhelming outlook.
Elsewhere, Brent extended its losses to near US$79 a barrel as prospects for an interim deal centered on reopening the Strait of Hormuz appeared to gain momentum.
Treasuries held their gains from the previous session as traders curbed expectations for interest rate hikes, while the yen’s gains, fuelled by the joint US-Japan intervention, stalled.
Investors will now be watching whether progress towards reopening the key shipping route extends the recent decline in oil prices, easing inflation pressures and reducing expectations for US Federal Reserve rate hikes.
They will also be assessing whether the AI trade can regain momentum after a month of volatility erased gains at several hedge funds.
“Markets are reacting to the possibility that a reopening of the Strait of Hormuz could help normalise global oil supplies and reduce near-term energy price pressures,” said Tony Miano at Wells Fargo Investment Institute. “Lower oil prices can ease inflation concerns.”
In other corners of the market, Treasuries rallied in the New York session as signs of progress toward a diplomatic resolution of the Iran war sent oil prices lower, curbing expectations for more than one Fed interest rate hike in the coming year.
The yield on the benchmark 10-year Treasury held at 4.61 per cent early on Wednesday, while a Bloomberg gauge of the US dollar edged lower.
Gold rose to about US$4,080 an ounce as the decline in oil prices reduced expectations that rates will stay higher for longer.
Elsewhere, Asia-based hedge funds logged extensive losses in July, as the tech sell-off led to what Goldman Sachs prime brokers said was the worst month for regional stock pickers on record.
Back to geopolitical news, a short-term deal may help normalise commercial shipping in the strait – a crucial conduit for global energy supplies – and prevent the resumption of fighting in the Middle East.
But even if such an agreement is reached, it might still fail to end the war conclusively or resolve Trump’s concerns about Iran’s nuclear programme.
Qatar said a proposal had been drafted, while US and Iranian officials expressed optimism about an agreement to reopen the crucial waterway, impacting oil prices.
“With so much optimism now priced into the oil market – and the risk of a repeat of last week’s false dawn still very real – the balance of risks appears to be becoming more skewed back to the upside,” wrote Tony Sycamore, an analyst at IG Markets in Sydney. BLOOMBERG
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