Even if the new U.S. peace proposal eventually leads to a permanent cessation of hostilities and the reopening of the strait - a big “if” given that the current plan reportedly leaves most contentious issues unresolved - that doesn’t mean the energy shock will be resolved anytime soon considering the level of disruption, particularly in Asia.
Back stateside, U.S. energy exports are continuing to soar - which has helped global markets during the crisis - but this is leading to dwindling domestic fuel stocks, which could be bad news for U.S. consumers already seeing rising prices at the pump.
Despite all the back and forth in the Middle East this week, investors appeared far more interested in the AI chip boom, including upgrades to AI spending projections. Morgan Stanley now sees the capex growth of the top five hyperscalers topping $800 billion this year and $1.1 trillion next year, while Goldman Sachs expects the cumulative spend by 2031 to be as high as $7.6 trillion.
That has helped push global chipmakers into the stratosphere. Shares of U.S. giant AMD on Wednesday leapt 15% to an all-time high after it forecast revenue above expectations on strong AI chip demand. Just as impressive were the moves in Asia. South Korea’s SK Hynix started the week with a 13% jump on Monday.
This tech rally helped guide indexes to fresh highs through the week, especially in Asia. South Korea’s KOSPI passed the 7,000 mark for the first time on Wednesday as Samsung's market cap hit $1 trillion. Even as stocks slipped toward the end of the week on the fresh U.S.-Iran military exchanges, Asian markets remained on course for strong weekly gains.
The euphoria is sure to reignite the debate about whether we’re heading into an AI-fuelled hyper-bull market or seeing a dangerous overvaluation that will lead to an inevitable correction. And what about the surprising resilience of emerging market stocks?
Elsewhere, government bonds came under pressure this week, with the U.S. long bond yield touching 5% before pulling back - drawing buyers once again despite investor appetite being tested by a whole cocktail of concerns.
Gilt yields were also elevated throughout the week. Where they go from here may be influenced by how Thursday’s UK local elections affect Prime Minister Keir Starmer’s position as leader of the governing Labour Party. Early results showed widely expected Labour losses in many councils materializing, but Starmer insisted on Friday he would not resign. Sterling pushed higher and gilt yields fell back.
Whoever ends up leading the Labour Party - Starmer or otherwise - there may be one lesson from the Trump playbook worth taking on board to avoid jolting bond markets.
In currencies, the yen had another volatile week, spiking repeatedly against the dollar and briefly touching a high of 155 per dollar on Wednesday. These moves could be the result of government intervention, with central bank data indicating that Japan may have spent as much as $32 billion to prop up the currency this week - on top of the $35 billion thought to have been spent last week.
Meanwhile, the dollar remained subdued, having given up almost all its post-Iran war gains. Could it drop far more if the U.S. and Iran strike a peace deal? There’s a lot to suggest that could be the case. Still, losses may be bounded by the broader AI boom. China's yuan, meantime, strengthened to three-year highs ahead of next week's Beijing summit between President Trump and Chinese President Xi Jinping.
On the macro front, Friday will bring the latest U.S. employment report, which is expected to show a gain of 62,000 jobs for April, down from March’s 178,000. But the unemployment rate is expected to remain unchanged at 4.3% and other prints through the week - JOLTS data, ADP’s private sector payrolls and weekly jobless claims - pointed to a stable labor market.
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