Global stocks rose as U.S. stock futures pointed to a slight recovery in the technology sector, at the start of a week in which South Korea's two chip giants will put their artificial intelligence bets to a new test.
Nasdaq 100 futures rose 1% after a holiday in the United States, and similar contracts for the S&P 500 index climbed 0.4%.
The pan-European STOXX 600 index rose 0.1%, hovering near a record high, while the MSCI Asia Pacific index was little changed as regional stocks fluctuated. Samsung Electronics' 164% year-to-date surge is expected to come under intense scrutiny when the company reports its financial results for the quarter ending in June on Tuesday. Days later, its rival SK Hynix will launch a massive $29 billion American Depositary Receipts (ADR) offering.
The events involving Samsung and SK Hynix take on added significance in a week devoid of US data and an earnings season that has yet to reach its peak. This coincides with global stocks emerging from a period of high volatility as investors assess whether the AI-fueled rally has gone too far.
Roberto Schultz of Singular Bank told Bloomberg: “Speculative positions in semiconductors and other high-demand technology sectors are likely to continue to decline, so the key question will be whether this leads to a shift to underperforming sectors or a broader correction. I don’t expect any sharp correction, as the second-quarter earnings season is expected to be very strong.”
Signs of recovery in supplies through the Strait of Hormuz
Brent crude fell 0.5% to $71.76 a barrel after shipping traffic through the Strait of Hormuz showed further signs of recovery. OPEC+ members also supported another slight increase in their collective production quotas for next month.
US Treasury bond prices rose as concerns about inflationary pressures eased, with the yield on the 10-year bond falling two basis points to 4.46%.
While the US dollar rose 0.2%, spot gold fell 0.5% to $4,156 an ounce, ending a three-day winning streak, amid expectations that the Federal Reserve will not raise interest rates anytime soon. Bitcoin, on the other hand, rose 0.3% to $62,879.
Goldman Sachs Group Inc. revised its yen forecast to 165 yen to the dollar within a year, up from 155 previously. The Japanese currency weakened against the dollar by 0.5% to 162.17 yen per dollar.
Concerns about the rise of artificial intelligence
Markets entered the second half of the year on cautious footing, with investors assessing the fallout from the Iran energy shock and whether the AI-driven stock rally could continue.
Attention is now turning to earnings season, looking for signs that technology companies are able to turn their investments in the artificial intelligence sector into profits.
Kazuhiro Sasaki, head of research at Phillip Securities Japan in Tokyo, said: “The market has been volatile recently, especially around technology. It’s likely that profit-seeking fund managers will continue to sell off AI stocks, which have been broadly outperformed, and shift to lagging and value stocks.”
He said sectors such as automobiles, machinery, and healthcare are poised to benefit as investors move out of the artificial intelligence market. Sasaki said investors are likely to maintain a cautious stance on technology stocks ahead of earnings reports from major chipmakers. He added that better-than-expected results could trigger a significant recovery, after many stocks have corrected to more reasonable levels.
Signs of recovery in Hormuz
Brent crude fell as shipping traffic through the US-protected Strait of Hormuz showed signs of recovery. OPEC+ members also supported another modest increase in collective quotas for next month.
Gold prices were nearly unchanged after three days of gains amid speculation that the Federal Reserve will not raise interest rates anytime soon. The precious metal traded around $4,175 an ounce.
Goldman Sachs Group Inc. revised its yen forecast to 165 yen to the dollar within a year, up from 155 previously. The Japanese currency traded at 161.54 yen to the dollar in early Asian trading.
Shift from technology to defense sectors
But overall, markets remain focused on chips and technology stocks after a recent sell-off.
Chipmakers remained in focus during Asian trading, with Hon Hai Precision Industry Co., Nvidia Inc.'s server assembly partner, reporting stronger-than-expected sales.
US semiconductor stocks began the third quarter with their biggest two-day drop in nearly a month. The Philadelphia Semiconductor Index, which surged a record 88% last quarter, fell 5% on Thursday. This brought its two-day decline to 12%, the largest since June 5.
Fabian Yep, market analyst at IG International, said: “The shift from high-valuation technology stocks to cyclical and defensive sectors continues to resonate with investors in the US and Asia. This sector rotation is a healthy development that allows for a wider market following the narrow rally between April and June.”
