Bond markets, Wall Street settle down after Fed hike
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US and European stock markets rallied as bond markets settled down after the Federal Reserve’s rate hike reassured investors that central banks are taking inflation seriously, with the Bank of England reiterating its focus on rising prices in keeping its benchmark rate on hold.
Chipmakers and semiconductor firms were back on the rise as Nvidia chief Jensen Huang said he expects to sell twice as many chips in the coming year, while safety concerns remain high as King Charles III warned artificial intelligence leaders of the dangers posed by the technology, and OpenAI revealed another batch of concerning behaviours by its models.
Oil prices eased on optimism Saudi Arabia will be able to get its East-West pipeline up to half-capacity after it was damaged by Houthi militants earlier this week, while ExxonMobil Holdings was reportedly close to agreeing to return to Venezuela.
And Australian futures are pointing to a positive start to the trading day, with a slew of top Reserve Bank of Australia officials appearing before a parliamentary select committee, while Statistics New Zealand’s monthly partial inflation reading is due on this side of the Tasman.
Time to reflect
Stock markets on both sides of the Atlantic were stronger as investors welcomed the Fed’s hawkish rate hike yesterday, which indicated another increase would be needed this year to rein in inflation.
The Bank of England kept its key rate at 3.75%, with policymakers saying they were ready to act if the energy shock fuelled a second round of price increases. The Bank of Japan is widely expected to lift its benchmark rate a quarter-point to 1.25% at today’s review.
The yield on US 10-year treasuries fell 6 basis points to 4.94%, while 10-year British gilt yields dropped 8 basis points to 5.22%. New Zealand’s equivalent was at 5% at 7am in Auckland.
Meanwhile, Brent crude oil futures fell 1.1% to US$104.63 a barrel amid reports that Saudi Arabia was seeking to return the damaged East-West pipeline through Oman to half capacity. Those declines were tempered by US President Donald Trump saying he had a big decision ahead of him on the Iran conflict before his meeting with Gulf leaders next week.
And, the Wall Street Journal reported ExxonMobil was close to signing a deal to explore investing in several Venezuelan oil fields.
“Wall Street is showing investors what happens when two major pressures move in the right direction at the same time: bond yields are easing and oil prices are coming back from their recent highs,” Moomoo market strategy consultant Greg Boland said in a note.
The S&P 500 climbed 1.2% in late trading and the tech-heavy Nasdaq Composite jumped 1.6%, while the Dow Jones Industrial Average increased 0.7%, with Nvidia, Amazon and Cisco Systems leading the blue-chip index higher.
Across the Atlantic, the UK’s FTSE 100 climbed 1.2%, while Germany’s DAX gained 0.7% and France’s CAC 40 advanced 0.6%.
A little more reflection
Nvidia rallied after CEO Huang said he expected chip sales to double in the coming year, while also calling for more rigorous safety tests at a summit hosted by British monarch, King Charles III. The King said AI leaders needed to urgently consider the existential dangers posed by the technology before they lost control of it.
Meanwhile, OpenAI disclosed a batch of six incidents involving its models developing ways to ignore normal constraints.
Still, the sector continues to move at pace with SpaceX said to be investigating buying distressed AI startups to accelerate its own models, while demand for computing capacity prompted providers Nebius and CoreWeave to increase their leasing prices.
And Generac Holdings agreed to supply up to US$8 billion of generators to Amazon’s data centres, including a warrant for a stake in the company.
Meta Platforms shares shrugged off a German court ruling that the social media giant was liable for fake ads posted by third parties on its Instagram and Facebook platforms.
The US Securities and Exchange Commission announced a five-year exemption letting companies offer trading in tokenised stocks and securities, letting platforms facilitate transactions without meeting the rules that apply to the likes of the New York Stock Exchange or Nasdaq.
Australian futures are pointing to a 0.6% gain for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar traded at 57.30 US cents at 7am from 57.28 cents yesterday.
RBA officials including governor Michele Bullock will appear before the House of Representatives Standing Committee on Economics today.
Local data today include Stats NZ’s selected prices index and merchandise trade figures, while Mercury NZ holds its annual meeting in Auckland.
