By Jamie McGeever
ORLANDO, Florida, May 6 (Reuters) – Hopes that a U.S.-Iran peace deal might be imminent propelled global stocks to new highs and sent oil prices tumbling on Wednesday, with the U.S. AI frenzy intensifying on strong earnings and reports of mega spending commitments in the sector.
In my column today, I look at the remarkable resilience of emerging markets to the global energy shock – EM stocks are at a record high, and bond spreads are the tightest in over a decade. If a peace deal in the Middle East is reached, this may well continue. But if not?
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Iran says it is reviewing new US proposal after sources say sides closing in on deal
2. Oil supply shock to worsen as inventories fall further even if conflict ends
3. Stunning US profit strength ignites stocks’ charge to record peaks
4. Curbing release of Fed meeting transcripts may improve debate, Warsh says in book
5. US long bonds over 5% – buy or beware?: Mike Dolan
Today’s Key Market Moves
• STOCKS: New highs for benchmark MSCI world, emerging market, and Asia ex-Japan indices, South Korea, S&P 500, Nasdaq and others. Europe and Britain’s FTSE 100 both +2%.
• SECTORS/SHARES: Nine of the 11 sectors in the S&P 500 rise. Tech, communications services, industrials +2% or more. Energy -4%. AMD +19%, Super Micro Computer +25%. Dell +10%, Uber +9%, Nvidia +6%. Chevron -4%.
• FX: Dollar -0.5%, yen spikes to 155/$ for the first time since Iran war started. Big gains for ZAR and CLP, while KRW has its best day this year.
• BONDS: Yields lower across the board. UK yields -10 bps or more, U.S. yields -8 bps at short end to bull flatten the curve.
• COMMODITIES/METALS: Oil slumps 8%, Brent briefly dips below $100. Gold +3%, silver +6%. Average U.S. gasoline price above $4.50/gallon.
Today’s Talking Points
* It’s vol over
The VIX volatility index, Wall Street’s so-called ‘fear index’, on Wednesday nudged to its lowest level in over three months. It is below where it was when the Iran war started in late February, and significantly down from its war peak.
It’s always a conundrum – does lower implied volatility lead to higher stock prices, or vice versa? It doesn’t really matter. The fact is Wall Street is surging to fresh high after fresh high, and investors see little sense in buying protection in the options market. Whether you agree with it or not, this market appears to have momentum.
* The $1 trillion club
Samsung joined the $1 trillion market cap club on Wednesday, its shares soaring 14% as part of a global AI chip surge that must be taking even tech bulls by surprise. Samsung becomes the second Asian company after TSMC with a trillion-dollar value.
The latest whoosh across the industry follows a report that Anthropic will spend $200 billion on Google’s cloud and chips. Some estimates suggest around half of the $2 trillion cloud order book at Google, Microsoft, Oracle, and Amazon is from two companies – Anthropic and OpenAI. Remember ‘too big to fail’?
* Suffer-a-jet
U.S. airlines spent over $5 billion on jet fuel in March, up $1.8 billion or 56% from what they spent the month before. If prices don’t come back down soon, could another low-cost carrier go bust like Spirit Airlines did last month?
The collective hit to airlines’ bottom line around the world is in the billions of dollars, and thousands of flights have already been canceled. It’s not just higher prices either – there could be physical shortages if key supply routes aren’t re-opened soon.
What could move markets tomorrow?
• Developments in the Middle East
• Energy market moves
• Australia trade (March)
• Taiwan inflation (April)
• European Central Bank Vice President Luis de Guindos and board members Isabel Schnabel and Philip Lane scheduled to speak
• Euro zone retail sales (March)
• Germany industrial orders, manufacturing (March)
• Norway interest rate decision
• Sweden interest rate decision
• UK local elections
• Bank of England’s Catherine Mann and Clare Lombardelli speak
• Mexico inflation (April)
• Mexico interest rate decision
• U.S. weekly jobless claims
• U.S. productivity (Q1, prelim)
• U.S. consumer credit (March)
• U.S. Federal Reserve officials scheduled to speak include New York Fed President John Williams, Minneapolis Fed President Neel Kashkari, and Cleveland Fed President Beth Hammack
• U.S. earnings include McDonald’s, Gilead Sciences, CoreWeave, Airbnb
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever;)
