Stocks surged to fresh records and oil prices dropped on Wednesday after a report that the United States and Iran are closing in on an agreement to end their war, while momentum in AI-driven trades accelerated.
Brent crude, the global benchmark, initially plunged to just below $100 per barrel, its lowest in two weeks, given the importance of oil passing through the Strait of Hormuz. Brent settled 7.83% lower at $101.27 a barrel. U.S. West Texas Intermediate crude fell about 7%, to $95.08.
On Wall Street, a humming U.S. corporate profit engine continued to rally U.S. stocks to record levels. The Dow Jones Industrial Average added 1.24%, while the S&P 500 rose 1.46%, and the Nasdaq Composite jumped 2%, both fresh highs.
Europe’s 600 index extended its gains and was last up 2.2% after climbing 0.7% a day earlier. MSCI’s All-Country World Index climbed 1.64% to a fresh record.
“A pretty punchy move on the back of those stories, almost as if the market has shifted into ‘buy everything’ mode,” said Michael Brown, senior research strategist at Pepper stone.
“It’s difficult to say how close to a deal we might be,” Brown said. “Market participants, though, aren’t going to wait for confirmation of good news and are essentially now front-running a positive outcome.”
The U.S. dollar, which has been a safe haven during the Iran war, dropped 0.3% against its major peers, reflecting investor hopes for a possible deal.
The yen by as much as 1.8% against the dollar in a swift move, triggering speculation of another round of intervention.
Meanwhile, yields on government bonds fell along with oil prices as traders dialed down their bets on central bank rate hikes. The 10-year U.S. Treasury yield fell 6.4 basis points to 4.352%.
Although stocks have rallied sharply, volatility in energy and bond markets could weigh on global growth. Oil prices are around 35% higher than they were when the conflict began in late February, while 10-year Treasury yields are around 40 bps higher.
AI RALLY BOOSTS GLOBAL STOCKS
In the United States, shares in chipmaker Advanced Micro Devices jumped around 18.6% as the company forecast second-quarter revenue above Wall Street expectations, helping drive AI enthusiasm across markets.
Rival Intel also rose to a record high, while chip designer Arm Holdings and chipmaker Qualcomm similarly surged.
The broadest index of Asia-Pacific shares outside Japan jumped 3.2%. Samsung Electronics surged 14%, topping a $1 trillion market value and overtaking Berkshire Hathaway.
(Reuters)
