Key facts
- Global stocks are hovering near record highs.
- The S&P 500 and Nasdaq reached record closing highs.
- Nvidia unveiled a new AI chip for PCs.
- Micron shares surpassed $1,000.
- Japan's Nikkei 225 index hit a record high above 68,000.
- Oil prices rose approximately 2% on Wednesday.
- U.S. crude exports reached a record 5.6 million barrels per day in May.
- The U.S. dollar strengthened significantly, reaching a two-month high.
- The Japanese yen neared 160 per dollar.
- U.S. employers added 172,000 jobs last month.
- Aluminum prices reached their highest point in over four years.
- Hedge funds returned 5.35% in May.
Global stock markets are trading near record highs, propelled by sustained optimism surrounding artificial intelligence and strong corporate earnings, particularly within the tech sector. The S&P 500 and Nasdaq have achieved record closing highs, with the S&P 500 extending its winning streak to nine consecutive days. Nvidia's unveiling of new AI chips for PCs has boosted its shares and those of partner Microsoft, while PC makers Dell and HP also experienced significant gains. Micron's shares surpassed the $1,000 mark. Japan's Nikkei 225 index also reached a record high above 68,000, driven by AI and semiconductor stocks.
However, the market rally faces potential volatility. Options market metrics suggest the rally is fragile, with investors increasingly positioning for further upside rather than hedging against downturns. Analysts warn of a potential sharp pullback. Geopolitical tensions, particularly concerning U.S.-Iran relations, are tempering optimism and contributing to market fluctuations. Renewed hostilities, including Iranian missile launches and U.S. strikes, have fueled concerns about potential oil supply disruptions. Oil prices have seen considerable volatility, rising approximately 2% on Wednesday with Brent futures settling at $97.81 and WTI at $96.02, driven by Middle East tensions. However, oil futures later trimmed gains following former President Trump's comments regarding Israel and Hezbollah, and reports of rapid talks with Iran. The conflict has impacted global oil trade, with U.S. crude exports reaching a record 5.6 million barrels per day in May. Market participants cite a structural supply disruption creating an effective deficit of around 5 million bpd, with depleted commercial inventories and OPEC spare capacity.
Economic data is also influencing market sentiment. Stronger-than-expected U.S. jobs data, with employers adding 172,000 jobs last month, has bolstered expectations that the Federal Reserve may raise interest rates, causing Treasury yields to retreat from recent highs. The JOLTS report indicated continued economic resilience. The U.S. dollar strengthened significantly, reaching a two-month high, driven by this jobs data and stalled peace talks with Iran. The Japanese yen fell sharply against the dollar, surpassing the 160 mark, prompting warnings from Japanese officials and signaling a potential shift in Bank of Japan policy towards fighting inflation. European shares ended lower, with the STOXX 600 down 0.3% on Friday, as tech stocks paused after a strong rally and stronger U.S. jobs data reinforced rate hike bets. European markets are also pricing in a 25-basis-point ECB hike next week. The U.S. services sector also showed increased activity in May, with the ISM services PMI rising to 54.5, though price pressures led some companies to implement hiring freezes.
In other market developments, aluminum prices have risen to their highest point in over four years, and copper prices are nearing $14,000 a ton, driven by global demand optimism and the Middle East conflict. Russia's crude oil exports have reached new highs in the first five months of the year. Qatar and the UAE are employing 'dark fleet' tactics for LNG shipments to navigate heightened geopolitical risks. Hedge funds reported a 5.35% return in May, outperforming the MSCI index, driven by a rally in U.S. tech stocks. The market has achieved its strongest start to a midterm-year second quarter since 1950. Separately, Japan faces a potential banana shortage crisis due to disruptions in supply chains caused by the Middle East conflict.