Business Recorder
SINGAPORE: Stocks rose on Thursday, powered by AI fervour as investors looked past the risk of higher interest rates, while a high-stakes summit between U.S. President Donald Trump and China’s Xi Jinping provided few surprises. Xi told Trump that trade talks were making progress at the start of a two-day summit but warned that disagreement over Taiwan could send relations down a dangerous path. Market reaction was muted as details from the summit were still sparse. European futures pointed to a strong open while U.S. stock futures were up 0.13%. China’s blue-chip stocks eased about 0.8% after hitting their highest level since late 2021 at the start of the session, while the yuan rose to a three-year high against the dollar. Charu Chanana, chief investment strategist at Saxo, said markets were looking for the absence of a new shock. “So far, that seems to be enough.” “With expectations low and AI momentum still strong, investors are treating vague diplomacy as a reason to move on rather than a reason to de-risk.” The Trump-Xi talks are likely to also feature the Iran war, which erupted at the end of February, amid an impasse in negotiations to end the conflict that has sent energy prices higher and left governments scrambling to roll out relief measures for consumers. Asia stocks turn green as AI cheer trumps Iran, inflation gloom Michael Strobaek, global chief investment officer at Lombard Odier, said preserving the status quo may be the most the Trump-Xi meeting can achieve. I think that, amid the uncertainties around the Middle East ceasefire, that may be enough for now.“ Stocks fly on AI The lack of negative surprises meant investors could focus on taking tech-heavy stocks even higher. Japan’s Nikkei was perched at a new all-time peak with data showing AI-linked demand partly helped lift earnings for Japanese firms. Seoul’s KOSPI gave up most of its early gains to trade 0.17% higher. SK Hynix, one of the AI darlings in Asia, is on the verge of reaching a $1 trillion market cap, becoming the second South Korean firm after Samsung to break into the trillion-dollar club. SK Hynix stock is up over 200% this year. That left MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.2%, hovering near the record-high hit last week. Analysts, though, caution that elevated oil prices and the impasse in negotiations to end the war in the Middle East could bring inflationary worries back into view. “Markets are trying to run two playbooks at once: AI and earnings says buy growth, but geopolitics and energy prices are quietly re-writing the inflation trajectory in the background,” said Saxo’s Chanana. Brent crude futures were slightly higher at $105.89 a barrel, while U.S. West Texas Intermediate futures fetched $101.33 per barrel, well above pre-war levels. Dollar gets a lift from inflation data In currencies, the U.S. dollar held on to its gains as investors wagered the Federal Reserve’s next rate move would be a hike after hotter-than-anticipated inflation reports this week. U.S. producer prices posted their biggest gain since early 2022, following Tuesday’s consumer price data that showed annual inflation rose at its fastest pace in three years. Higher inflation and stronger labour market have led some traders to price in the prospect of a potential hike in the first half of 2027, although most economists and analysts continue to see a rate cut as the likely next move by the Fed. The euro bought $1.1716, near its lowest in a week. Sterling was at $1.3519as traders kept a wary eye on the widening political crisis in Britain. The yen fetched 157.93 per U.S. dollar, keeping traders wary of fresh Tokyo intervention after recent sharp spikes that sources say were driven by officials stepping in to prop up the battered currency. The two-year U.S. Treasury yield was at 3.9708%, down 1.1 basis points but near the 1-1/2-month high it hit in the previous session. The benchmark 10-year yield stood at 4.468%, having touched close to a one-year high on Wednesday.
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