Following the recent weakness around concerns of elevated valuations for artificial intelligence companies, tech came back into favour ahead of the start of earnings season, albeit still with some pockets of volatility over the week. Sentiment was supported by South Korean chipmaker SK Hynix making its Nasdaq debut on Friday, in which it had raised $26.5bn in its American Depositary Receipt sale.
For the week the S&P 500 rose 1.2% and the tech-heavy Nasdaq Composite advanced 1.7%. Meanwhile the Dow Jones Industrial Average was down 0.5% and small caps also lagged. Oil prices had ticked up after President Trump had declared the interim peace deal with Iran was “over”, raising concerns over whether oil supplies would be impacted. Prices pulled back later in the week as markets awaited clarity on the situation, but still logged a weekly gain. Treasury yields pushed higher amid growing expectations for interest rate hikes later this year, as well as the Middle East tensions. The two-year yield saw its second highest close of the year, while the 10-year yield ended at 4.56%.
European markets found it harder to shake off the concerns around the US-Iran strikes. The region is more sensitive to energy price shocks so as such sentiment was more cautious. For the week the pan-European STOXX 600 fell 1.8%, snapping four weeks of gains. Also, unlike the US, there was less of a bounce in tech stocks. Among regional indices, the German DAX dropped 2.8% and France’s CAC lost around 2%. Meanwhile Spain’s IBEX was down 2.4% fuelled by a sharp loss on Wednesday after President Trump called Madrid a “terrible partner” and asked the treasury secretary to halt all trade to Spain.
Japanese markets were on the weaker side with the Nikkei 225 falling 1.7%, with geopolitical tensions weighing. In bond markets the yield on the 10-year Japanese government bond hit its highest level since 1996 on Thursday, with growing worries around the government’s fiscal plans and the impact on monetary policy. South Korea’s Kospi once again saw steep swings owing to its concentration in artificial intelligence names, with the index falling 7.6%. In China, the Shanghai Composite declined 1.2%, again influenced by the profit-taking in semiconductors. In contrast, Hong Kong’s Hang Seng jumped 3.5%, helped by healthcare, materials and internet names.