Wall Street Gets an Oil Change
Global equities were mixed as optimism around the US–Iran peace deal and the reopening of the Strait of Hormuz drove oil prices lower for a second consecutive session. Wall Street rotated into cyclical sectors, while Europe benefited from easing inflation concerns and Asia-Pacific markets were influenced by central bank decisions and weaker Chinese economic data.
Wall Street rotates as oil slides and SpaceX extends gains
US equities were mixed as falling oil prices drove a rotation out of technology and into cyclical sectors. The DOW rose +0.7% to a fresh record high, while the S&P 500 fell -0.3% and the NASDAQ declined -0.6%. AMD remained under pressure, falling -5.6%, while Intel lost -6.8% and Nvidia slipped -1.6% as investors continued to rotate away from AI-linked names. Oil prices extended their decline after President Trump said the Strait of Hormuz would reopen on Friday and remain toll-free beyond the initial 60-day period, helping lift industrials and financials. Caterpillar gained +2.3% and JPMorgan rose +3.0% as investors bet lower energy prices could support economic growth. Economic data was mixed, with import prices rising +1.9% in May and +6.7% year-on-year, the fastest annual increase since 2022, driven by higher energy costs. SpaceX continued its post-IPO surge, rising +9.0% and briefly overtaking Amazon in market value, while also announcing plans to acquire AI coding start-up Cursor for US$60bn. The US two-year yield fell -2bp to 4.047% and the 10-year yield lost -4bp to 4.426%.
Europe rises as lower oil prices lift sentiment
European equities advanced as lower oil prices improved market sentiment. The STOXX 600 gained +0.2%, while France’s CAC 40 rose +0.8%, the UK’s FTSE 100 added +0.6% and Germany’s DAX gained +0.1%. Sentiment was also supported by reports that Qatar plans to rapidly increase LNG production once the Strait of Hormuz reopens. Investors meanwhile looked ahead to Federal Reserve and Bank of England policy decisions, with lower energy prices easing inflation concerns. Banking stocks outperformed after Germany rejected UniCredit’s (+4.8%) attempt to acquire a stake in Commerzbank (+0.3%).
Asia-Pacific mixed as BOJ hikes, RBA holds, and China slows
Asia-Pacific equities traded mixed as investors assessed progress towards a US–Iran agreement, a surprise Bank of Japan rate hike and weaker Chinese economic data. Japan’s Nikkei 225 ended +0.1% higher after the Bank of Japan raised interest rates to their highest level since 1995, while South Korea’s KOSPI gained +2.1%. Hong Kong’s Hang Seng fell -1.4% and China’s Shanghai Composite slipped -0.1% after China’s consumer spending and investment weakened to their lowest levels since the pandemic despite strong export growth. Australia’s ASX 200 gained +0.1% after the Reserve Bank of Australia left its cash rate unchanged at 4.35%, while reiterating that it was prepared to tighten policy if inflation remained elevated. In New Zealand, the NZX 50 rose +0.5% to its highest close in more than five months, led by SkyCity (+8.2%) on expectations that lower energy costs could support tourism and travel demand.
Crude drops as supply fears ease
WTI Crude lost -5.3% to US$76.45/bbl and Brent Crude dropped -4.7% to US$79.28/bbl. Gold rose +0.8% to US$4,339.79/oz.