By Dow Jones Newswires Staff
U.S. stock futures were mostly higher in early European trade after a global tech selloff halted a boom in artificial-intelligence-related stocks.
Oil prices extended falls on signs that shipping activity through the Strait of Hormuz is gradually resuming, with international authorities reporting improved safety conditions.
Markets continue to adjust to the Federal Reserve’s hawkish turn last week, with the dollar trading close to a 13-month high and gold falling below $4,100 a troy ounce on increasing expectations for rate hikes later this year.
The Fed’s turn helped spur recent sessions’ tech selloff, though futures for the tech-heavy Nasdaq were poised to steady. Choppy Asia trade ended in the green for semiconductor stocks, while tech stocks nudged higher in early European trade.
Following the tech rout, Micron Technology earnings after market close Wednesday will come under intense scrutiny. Investors will also watch for the result of an annual Federal Reserve bank stress test.
- In early European trading, Brent crude was down 1.1% to $75.93 a barrel, while WTI futures fell 1.3% to $72.31 a barrel. “Although negotiations remain complex and questions persist over the future governance of Hormuz, the market is increasingly pricing in a gradual normalization of Middle East energy flows,” analysts at MUFG said. Sentiment has also been supported by the U.S. sanction waiver on Iranian oil sales, which has strengthened expectations of a meaningful increase in regional crude supply.
- In the U.S., futures for the S&P 500 were up 0.1% while the Dow Jones Industrial Average slipped 0.2%. Nasdaq futures rose 0.1%.
- Asian stocks were choppy on Wednesday. South Korea’s Kospi rose 3.3% after swinging between gains and losses following the 10% correction in the previous session. Samsung Electronics jumped 9.8% and SK Hynix was up 1.0%. Japan’s Nikkei Stock Average ended 0.9% lower, while China’s Shanghai Composite Index edged 0.1% higher. Hong Kong’s Hang Seng index rose 0.4%.
- European indexes were mixed in muted early trade. The Europe-wide Stoxx 600 was flat as tech stocks nudged higher, but defense stocks slide as bellwether Rheinmetall fell sharply. The defense giant tumbled close to 12% on a report that the German government is pulling funding for a new warship. The stock dragged Germany’s DAX, which fell 0.5%. London’s FTSE 100 traded flat, as weakness in software and defense stocks was countered by strength across the real estate and housebuilding sectors. Meanwhile, gains for luxury stocks bolstered the CAC 40–up 0.35%–in Paris, as LVMH jumped 2.2%. The semiconductor-heavy AEX edged up 0.1% as ASML rose 0.5% after falling sharply in the last session. Italy’s FTSE MIB and the Spanish IBEX 35 both fell around 0.3%.
- The dollar rose near a 13-month high, supported by expectations that the Federal Reserve could raise interest rates this year and the recent selloff in global tech stocks. The Fed’s meeting last week signaled the prospect of tightening by year-end, prompting markets to bring forward expectations for rate rises. Market pricing on LSEG implies a 90% chance that the Fed will increase rates by 25 basis points in September. A strong U.S. purchasing managers’ survey on Tuesday further fueled these bets. The selloff in tech stocks also benefits the dollar due to its safe-haven status. The DXY dollar index rose 0.1% to 101.495, having reached as high as 101.512 earlier.
- U.S. Treasury yields edged higher in Asian trade as investors continue to price in some possibility of a Federal Reserve rate hike this year. Oil prices, meanwhile, decline, capping the increase in yields. Investors will watch the Treasury’s $70 billion auction of five-year notes, while the U.S. data calendar is light. The two-year Treasury yield was up 0.7 basis points at 4.206%, while the 10-year yield was up 0.6 basis points at 4.498%.
- Eurozone government bond yields edged lower, helped by falling oil prices and ahead of Germany’s Ifo business sentiment indicator. The Ifo data will follow Tuesday’s weak provisional German purchasing managers’ surveys for June. Moves are limited, however, due to lingering inflation fears and the fact that a further interest-rate hike by the European Central Bank remains possible. On Wednesday, supply will come from Italy and Germany. The 10-year Bund yield fell 0.6 basis points to 2.906%.
- Bitcoin recovered only slightly after reaching a 12-day low Tuesday amid a recent selloff in global tech stocks. The cryptocurrency edged up 0.5% to $62,686 after falling to as low as $61,921 on Tuesday. It has struggled to recover meaningfully since reaching a 20-month low of $59,125 on June 5, trading in a narrow range.
- Gold prices fell, extending the previous session’s losses as a stronger U.S. dollar and growing expectations of interest-rate hikes this year weighed on sentiment. “Limited support came from rising Treasury bonds as lower energy prices ease concerns about inflation,” analysts at Saxo Bank said. At the same time, “gold’s unusually strong positive correlation with the S&P 500 continues to weigh on prices, pushing the metal into the key $4,000-$4,100 support zone.” In early European trading, New York futures were down 1.2% to $4,098.70 a troy ounce.
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