Stocks Surge on AI Advances and Rate Cut Optimism: Implications for Investors Amid Tariff Turbulence
Global Stock Markets Rise Amid AI Optimism and Interest Rate Expectations
SINGAPORE: Global stock markets experienced gains on Thursday, driven by optimism surrounding artificial intelligence and expectations of potential interest rate cuts. Investors, however, remained vigilant regarding US President Donald Trump’s ongoing trade policies.
U.S. copper futures increased their premium over the London benchmark following Trump’s announcement of a 50% tariff on copper imports, effective August 1. Additionally, he has threatened similar tariffs on Brazilian exports to the U.S. and issued warnings to seven other less prominent trading partners.
Despite these developments, market reactions have been relatively muted. European stocks saw a positive trend, with Germany’s DAX rising by 0.1% and the UK’s FTSE 100 achieving a 1% increase, reaching record highs. Meanwhile, Asia-Pacific shares outside of Japan gained 0.5%, although Nasdaq futures dipped slightly after the index set a record high earlier this week.
Jeff Ng, head of Asia macroeconomic strategy at SMBC, remarked that investors seem to have become "numb" to the evolving trade situation, noting that announced tariffs are frequently subject to negotiation, postponement, or cancellation.
Market momentum was also bolstered by strong quarterly results from TSMC, indicating sustained demand for AI-related products. This news followed Nvidia’s achievement as the first public company to exceed a $4 trillion valuation, contributing to the rise of tech stocks in Korea and Japan.
Anticipations of at least two rate cuts from the U.S. Federal Reserve this year further enhanced investor optimism. Minutes from the Fed’s last meeting revealed that most members expect potential cuts later this year, considering inflation from tariffs to be likely “temporary or modest.” Mohit Kumar of Jefferies added that the Fed is likely to focus on employment rather than inflation, suggesting that any weakness in employment figures over the summer could prompt rate cuts as early as September.
The dollar experienced a slight depreciation against the euro but remained stable against the yen at 146.35, following an earlier spike when Trump announced 25% tariffs on Japan.
The euro rose by 0.17% to $1.1734, while sterling increased by 0.15% to $1.3611. Conversely, the Brazilian real remained close to a one-month low at 5.5826 per dollar, with volatility surging due to U.S. tariff threats.
Lee Hardman of MUFG noted, "The risk is that carry trades continue to be unwound, fueled by heightened trade risks and increased financial market volatility."
In the cryptocurrency market, bitcoin hovered near a record high at $111,207, while ether rose by 1.8% to $2,790.9.
Brent crude prices steadied at $70.2 per barrel, and U.S. crude remained unchanged at $68.33. Spot gold gained 0.22%, reaching $3,320.59 an ounce. — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The recent global market optimism, driven by advancements in artificial intelligence and potential US interest rate cuts, presents significant opportunities for businesses in Oman to expand in tech-driven sectors. However, the impending tariffs on copper imports could pose risks, particularly for industries reliant on metals, urging smart investors to diversify their portfolios and assess supply chain vulnerabilities. Entrepreneurs should remain vigilant and exploit emerging markets while staying abreast of geopolitical developments that may impact trade dynamics.
