- Equity markets cool after more record highs
- AI trade booms, with established suppliers and fresh faces
- Government yields paint a troubling picture for interest rates
- Oil on track for 6% weekly gain
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“After another strong session yesterday, global equity markets are starting today on the back foot, in another familiar turn of the see-saw pattern that has defined recent trading. But for all the day-to-day volatility, the bulls are still having the better of it, with the net effect being a steady grind higher across major indices. The S&P 500 passing 7,500 for the first time is the latest marker of that momentum, helped by a strong earnings season that continues to outweigh lingering inflation concerns. Investors are being asked to look through plenty of noise, but for now, earnings power is doing the heavy lifting.
The AI story continues to rip through markets, with fresh fuel coming from both established suppliers and new names hitting the public market. Applied Materials, which makes the complex equipment that chipmakers need, delivered record quarterly revenue and guided well ahead of expectations, with management now expecting its semiconductor equipment business to grow more than 30% this calendar year as AI drives demand. Cerebras, a specialist in dinner-plate-sized AI chips built to process models faster, added another sign of investor appetite after shares surged almost 70% on debut, making it one of the biggest AI IPO moments of the year. Put together, it’s another reminder that the AI trade is no longer just about the companies building models – the demand is spreading deeper into the infrastructure layer, from chips themselves to the tools needed to make them.
But not everything is rosy. US 10-year Treasury yields are pushing around one-year highs, while UK gilt yields have eased a touch from earlier in the week but remain at levels that scream discomfort rather than calm. That pressure is feeding directly into rate expectations, with markets weighing up the risk of renewed hikes in the US and nearly three Bank of England hikes by year-end, even if equity markets have chosen not to care too much just yet. The one crumb of comfort is that policymakers still look undecided, with Bank of England Deputy Governor Sarah Breeden suggesting the Middle East conflict is “much less likely” to trigger a 2022-style inflation shock, which supports the view that central banks could remain on hold while this conflict plays out.
Oil prices are heading for a weekly gain of more than 6%, as stalled US-Iran diplomacy keeps supply fears firmly in focus. Flows through the Strait have already taken a heavy hit, with the IEA estimating a drop of around 4 million barrels a day in March and April. Even if resolved next month, the oil market could remain undersupplied through October, keeping inflationary pressures high and adding another headache for consumers, central banks, and, eventually, investors.”
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