Global markets are navigating a complex landscape shaped by rising inflation, geopolitical tensions, and fervor for artificial intelligence. On Wednesday, European stocks opened broadly higher, with the Euro Stoxx 50 index rising 0.78%. Asia-Pacific markets initially declined before recovering, with the MSCI Asia Pacific Index closing up 0.5%. South Korean stocks reversed early losses, led by chip giants, to finish 2.6% higher. UK government bonds opened higher across the board, with the 10-year yield falling 4 basis points to 5.06%. Japan's 20-year government bond yield climbed to its highest level since 1997, while the US 30-year Treasury yield also approached its year-to-date high. A new trading narrative dubbed "NACHO" (No Alternative for Chokehold Opening, referring to the Strait of Hormuz) has rapidly gained traction on Wall Street, reflecting investors' dwindling confidence in a swift diplomatic resolution. Brent crude oil maintained its position above $100 per barrel, trading around $106.30. The US Consumer Price Index (CPI) for April rose more than expected year-over-year, further strengthening market bets on a Federal Reserve rate hike next year. On the copper front, prices on the London Metal Exchange extended their winning streak to eight sessions, reaching $14,196.50 per ton and moving closer to the record high set in January. Francis Tan, Chief Asia Strategist at Indosuez Wealth Management, noted: "In investors' minds, the 'fear of missing out' (FOMO) in the tech sector is currently clearly outweighing the impact of the Iran situation. The Iran issue remains a latent concern, and its impact could become apparent if US stock valuations climb further."
European stocks opened higher collectively. The Euro Stoxx 50 index gained 0.78%, the UK's FTSE 100 rose 0.58%, France's CAC 40 advanced 0.51%, and Germany's DAX increased 0.68%.
Japan's Nikkei 225 index closed up 0.8% at 63,272.11 points. The Topix index rose 1.2% to close at 3,919.48 points. South Korea's KOSPI index surged 2.6% to finish at 7,844.01 points.
Japan's 20-year government bond yield climbed to its highest level since 1997, and the US 30-year Treasury yield also neared its year-to-date high. UK government bonds opened higher across the board, with the 10-year yield falling 4 basis points to 5.06%. The US Dollar Index was little changed. Brent crude oil fell 1.4% on the day to around $106.30 per barrel. Gold declined 0.3% to approximately $4,700 per ounce; silver traded near $86.20 per ounce. Copper prices on the London Metal Exchange remained strong, hitting $14,196.50 per ton after eight consecutive days of gains, just a step away from the all-time high of $14,527.50 set in January this year. Other base metals also rose broadly. Aluminum increased 0.3% to $3,574 per ton, while tin gained 0.5% to $55,070 per ton. Bitcoin rose 0.5% to $81,041.32.
Chip stocks led gains in Asian markets, with the AI narrative overshadowing geopolitical concerns. On Tuesday, European stocks opened higher. The Euro Stoxx 50 index gained 0.78%, the UK's FTSE 100 rose 0.58%, France's CAC 40 advanced 0.51%, and Germany's DAX increased 0.68%. The Philadelphia Semiconductor Index plunged 3%, marking its largest single-day drop in two weeks and one of the most severe tests during this strong rally. However, bargain hunters quickly entered the market at the Asian open. SK Hynix surged 9.4% to a record high; Samsung Electronics rose 4.4%; the MSCI Asia Pacific Tech Index overall gained 0.6%. Joanna Shen of JPMorgan Asset Management believes the market is currently in the "early adoption phase of AI," and the earnings outlook for tech stocks remains supportive.
Inflation Exceeds Expectations, Bond Markets Under Pressure Data from the US Labor Department showed the CPI rose 3.8% year-over-year in April, the largest increase since 2023. Following the data release, markets increased bets on a Fed rate hike next year. The interest rate-sensitive 2-year US Treasury yield held below 4%, while the 30-year yield was only about two basis points away from its year-to-date high. The reaction was particularly pronounced in the Japanese market. Pressured by high energy prices and inflation, Japan's 20-year government bond yield broke above its January peak, reaching its highest level since 1997. Australian bond yields also followed US Treasuries lower. Skyler Weinand of Regan Capital stated: "Inflation is making a strong comeback, primarily driven by stubbornly high oil prices. As the Middle East conflict continues to evolve, this trend will dominate the inflation trajectory for the remainder of the year." Brent crude oil fell 1.4% on the day to around $106.30 per barrel; gold declined 0.3% to approximately $4,700 per ounce; silver traded near $86.20 per ounce. In a research note, Tim Waterer, Chief Market Analyst at KCM Trade, pointed out the core question facing the market: "If high oil prices persist long-term, can US companies maintain their strong profitability?"
Copper Approaches Record High on Dual Supply-Demand Drivers Copper prices on the London Metal Exchange remained strong, hitting $14,196.50 per ton after eight consecutive days of gains, just a step away from the all-time high of $14,527.50 set in January this year.
Supply-side pressures persist. Tight sulfur supplies from the Middle East threaten production prospects at some African mines, compounded by existing disruptions at several major global mining operations. Demand remains relatively robust, primarily supported by strong consumption in China's power grid, renewable energy, and artificial intelligence sectors. Analysts indicate that as concerns related to conflict in Iran have somewhat eased, supply issues combined with solid demand are driving a significant recovery in industrial metals. In the US market, copper futures on the COMEX jumped to a record high of $6.69 per pound. The premium over LME copper prices widened to over $500 per ton, as markets bet the US will impose tariffs on refined copper imports. Related expectations are attracting refined copper flows into the US, tightening supply in other regions. The US Commerce Department is expected to release its latest assessment of the domestic copper market by June 30. Other base metals also rose broadly. Aluminum increased 0.3% to $3,574 per ton, while tin gained 0.5% to $55,070 per ton.
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