Staff writers
Updated ,first published
The Australian stock market has opened in positive territory following reports that the US and Iran backed new hikes that threatened a ceasefire based on peace talks.
The S&P/ASX 200 rose 41.2 points, or 0.5 percent, to 8805.4 as Wall Street futures rose after reports that the United States and Iran have agreed to cease hostilities before peace talks resume this week on the Strait of Hormuz and other issues to end the conflict. It is a sign of slowing down after several days of tit-for-tat attacks that tried to stop it.
Last night, Iran fired missiles and drones at US military bases in Kuwait and Bahrain, shortly after US President Donald Trump threatened to fire Iran’s leadership if they did not comply with an interim agreement to end their war. But, Axios reported the U.S. and Iran later agreed to end the strike and met this week in Qatar to resume talks, citing an unidentified U.S. official.
Oil prices rose in early trade, with Brent, the global benchmark, up 0.6 percent to US$72.39 while US crude added 1 percent to US$69.88, with the Australian dollar trading at US68.93¢.
On Friday, most of the US stock market rose after oil prices fell to pre-war levels with Iran, but the decline in stocks increased as concerns over artificial intelligence technology kept the market under control.
The S&P 500 finished almost flat and slipped less than 0.1 percent to close for just its second losing week in the past 13. The Dow Jones Industrial Average shed 44 points, or 0.1 percent, and the Nasdaq composite fell 0.2 percent.
Healthcare stocks, meanwhile, were some of the biggest forces that rose in the market after a committee of the European Medicines Agency recommended several drugs for approval and the addition of another dozen of their therapeutic indications. That included one for Eli Lilly, whose shares rose 7.1 percent.
Besides Lilly, nearly two out of every three stocks in the S&P 500 rose. But further drops for AI stocks helped to overshadow them.
After rising to incredible heights and leading the market for years, AI stocks have come under pressure recently due to concerns that their gains may not keep pace with their stock price rallies. And those drops have a big impact because AI stocks have become bigger and more influential on Wall Street, making their stock price movements weigh more heavily on the index than others.
Micron Technology’s 6.7 percent drop was the heaviest on the market, for example. The computer memory maker has been a big winner this year, and its stock has nearly quadrupled, as the growth of AI has led to increased demand for its products.
But investors saw the downside of the operation on Thursday, when Apple said it had to raise prices on laptops and other products by a significant percentage to cover the increase in memory prices. The concern is that such high prices may lead to low demand.
Highlighting the space flight AI shares have been on, SpaceX briefly fell 2.9 percent in the morning to below $US149. It then erased volatility losses to gain 3.5 percent before finishing with an average gain of 0.2 percent.
After initially selling its shares at $US135 apiece in its halved initial public offering earlier this month, SpaceX’s price briefly rose above $US225 within the first few days of trading. Apart from rockets, Elon Musk’s company also owns the intelligence business xAI.
The biggest loser of the day in the S&P 500 was a 23.7 percent drop in ON Semiconductor, which said it agreed to buy Synaptics in an all-stock deal worth about $US7 billion ($10.1 billion).
All told, the S&P 500 fell 3.47 points to 7,354.02. The Dow Jones Industrial Average fell 44.51 to 51,876.11, and the Nasdaq composite fell 60.99 to 25,297.62.
In the bond market, Treasury yields have been reduced by oil prices. The yield on the 10-year Treasury fell to 4.37 percent from 4.40 percent late Thursday.
It fell after a report showed inflation expectations over the next year fell among US consumers to 4.6 percent from 4.8 percent in May. That’s still high, but a downward spiral means less potential for a vicious cycle where expectations of higher inflation spur a change in behavior that leads to higher inflation.
High yields in bond markets around the world fueled by concerns about inflation have threatened to slow the economy, and have already sent mortgage and other credit rates higher. High yields also affect investment prices, especially those that seem more expensive. That increases the pressure on AI winners.
Asian stock markets started Friday with sharp declines due to losses in AI gainers.
In Japan, a 12.5 percent drop in Softbank Group Corp. helped lower the Nikkei 225 index by 4.2 percent. The company is a major investor in OpenAI, the maker of ChatGPT, and reports in New York Times suggested OpenAI is considering delaying its initial public offering until next year from the second half of this year.
Such an IPO would give OpenAI an opportunity to raise more money to spend on data centers, as well as an opportunity for early stage investors like Softbank to cash in. But the recent skepticism of SpaceX stock and AI stocks more broadly could be a sign of waning appetite for big AI stocks among investors.
In South Korea, SK Hynix fell 8.4 percent, and Samsung Electronics sank 5.3 percent. That helped lower Kospi by 5.8 percent and reduce its year-to-date profit to 99.6 percent.
