Wall Street clawed back ground overnight as bargain hunters returned in force, snapping up beaten-down technology names and reigniting enthusiasm that the bull market still has legs.
The rebound was led by the chipmakers, with Nvidia and Micron Technology powering ahead 5.6% following their worst selloff since 2020. The recovery was enough to lift the S&P 500 by 0.3% to close just above 7,400, though most companies on the index actually finished lower. The Nasdaq 100 jumped 1.6%, while the Dow Jones Industrial Average slipped 0.2%. Apple bucked the trend, sliding 1.9% as investors gave a lukewarm response to the unveiling of its next-generation AI platform.
Sentiment was also buoyed by news that Iran and Israel had agreed to ease strikes against one another, easing fears that a fresh flare-up in violence would derail peace talks and prompting oil to pare its earlier surge.
Morgan Stanley described last week’s positioning-driven selloff as a healthy reset, maintaining a constructive outlook underpinned by earnings and robust economic data and reaffirming a year-end S&P 500 target of 8,000. Citigroup struck a similarly upbeat note, lifting its year-end target to 8,100 from 7,700 on the back of stronger earnings expectations. UBS Global Wealth Management added that business fundamentals remain strong despite the recent pressure on tech, and suggested markets are overstating how hawkish central banks really are.
After Friday’s blowout payrolls report, attention now swings back to inflation. Wednesday’s May consumer price index is tipped to climb 4.2% from a year earlier, which would mark the highest rate in more than three years, though core CPI is expected to cool slightly on a monthly basis.
In corporate news, SpaceX’s float is reportedly heavily oversubscribed, while Amazon is set to sell C$14 billion of investment-grade bonds, the largest corporate offering on record in the currency. Intel surged after reports Google will rely on it for more than three million specialised AI chips in 2028.
Europe
European equities finished lower after a choppy session, with investors whipsawed by conflicting signals out of the Middle East. The Stoxx 600 closed down 0.2% in London, having fallen as much as 1% at its worst as sentiment swung on geopolitical headlines.
Risk appetite improved after the Iran-Israel de-escalation, with technology staging a sharp turnaround to lead gains by the close after opening as the day’s weakest sector. Momentum and growth were the standout styles, while value lagged.
Merger activity continued to flow. Tate & Lyle soared 15% after Ingredion agreed to acquire the British firm for £2.7 billion, while Banca Monte dei Paschi di Siena rose 13% after attracting takeover interest from both Intesa Sanpaolo and Banco BPM.
European stocks have advanced 5% so far this year, trailing the S&P 500’s near 9% gain. Focus now turns to the European Central Bank, which is expected to deliver its first rate increase since September 2023 later this week. Elsewhere, Zealand Pharma tumbled 23%, its worst session in more than three months, following trial data for its experimental weight-loss drug, while Novo Nordisk fell 4.2%.
Australia
Australian shares are set to open lower, though futures trimmed earlier losses after Wall Street’s rebound. ASX 200 futures were up 23 points or 0.3% to 8,533, narrowing the gap from Thursday’s close at 8,625 to roughly 92 points, with the local market yet to react to Friday’s tech selloff.
The Australian dollar copped a hiding, dumped alongside bonds as renewed Middle East fighting and a strong US jobs report raised the prospect of higher interest rates on both sides of the Pacific. The Aussie fell 1.2% to a two-month low of US70.45¢ after Iran launched ballistic missiles at Israel over the weekend, the most serious test yet of a fragile two-month ceasefire.
Markets were already rattled by Friday’s stronger-than-expected non-farm payrolls report, which showed 172,000 jobs added last month. Traders are now fully priced for the US Federal Reserve to begin raising rates by December, up from a 46% probability beforehand. Domestically, money markets are pricing an 80% chance the RBA lifts the cash rate again by September, up from 66% a week earlier, with fuel prices having spiked 30% since the war in Iran effectively shut the Strait of Hormuz three months ago.
Commodities and Currencies
Oil held onto gains even as it pared its surge, with Brent crude up 1.2% to US$94.19 a barrel after the Iran-Israel de-escalation. West Texas Intermediate rose 1% to US$91.42.
Gold was little changed at US$4,328.83 an ounce, while iron ore eased 1.4% to US$100.35 a tonne. In currencies, the euro held at US$1.1531 and the Japanese yen was steady at 160.22 per dollar. Bitcoin rallied 3.2% to US$63,709, with ether adding 3.5%.
In bond markets, the US 10-year yield rose four basis points to 4.56%, while the Australian 10-year sat at 4.90%.
Economic Calendar
AU:
- Consumer Confidence 10:30
US:
- ADP Employment 22:15
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
