Key facts
- Asian markets are mixed, following strong Q2 gains in indices like the Nikkei, Kospi, and Taiex.
- U.S.-Iran talks concerning passage through the Strait of Hormuz are at an impasse.
- South Korea achieved its fastest export growth in nearly 50 years in June, with semiconductor shipments surging.
- Wall Street futures are down slightly after a positive overnight session driven by tech stocks.
- Goldman Sachs forecasts S&P 500 EPS to grow 22% year-on-year, with AI infrastructure contributing significantly.
- 10-year Treasury yields saw a notable increase, potentially signaling anticipation of strong U.S. payrolls and further Fed rate hikes.
- The dollar/yen exchange rate reached a 40-year high of 162.82.
- Key central bank leaders, including Fed Chair Kevin Warsh, ECB President Christine Lagarde, and BoE Governor Andrew Bailey, are scheduled to speak.
Global markets experienced a hesitant start to the new quarter, with Asian stocks showing mixed performance as investors digested substantial gains from the previous quarter and stalled U.S.-Iran negotiations. The talks, involving Jared Kushner and Steve Witkoff in Doha, are reportedly stuck on Iran's potential to charge for passage through the Strait of Hormuz.
Despite the geopolitical uncertainty, economic data from Asia has provided some support. Japan's manufacturing sector sentiment and activity have reached their highest levels since 2018 and 2014, respectively, driven by surging new orders. South Korea reported exceptional export growth in June, nearly 50% year-on-year, with semiconductor shipments nearly doubling, making it the fourth country globally to achieve $100 billion in monthly exports.
On Wall Street, stock futures showed mild declines after a strong overnight session led by technology companies. These same firms are expected to drive significant earnings growth this season, with analysts at Goldman Sachs projecting a 22% year-on-year increase in S&P 500 earnings per share. AI infrastructure stocks are anticipated to account for nearly 60% of this growth, with Nvidia and Micron being major contributors.
However, these strong earnings may need to counteract the appeal of higher bond yields and the possibility of further Federal Reserve rate hikes. 10-year Treasury yields rose nearly 9 basis points on Tuesday, with investors potentially bracing for an upside surprise in upcoming U.S. payrolls data. The probability of a Fed hike in September is estimated between 67% and 88%.
Adding to market movements, the dollar/yen pair climbed to a fresh 40-year high of 162.82, with no immediate signs of Japanese intervention. Major central bank officials, including Fed Chair Kevin Warsh, ECB President Christine Lagarde, and BoE Governor Andrew Bailey, are scheduled to speak today at the ECB Forum in Sintra, Portugal.