European stocks advance, AI propels US into record territory

AFP | London

The Daily Tribune - www.newsofbahrain.com

Enthusiasm over AI helped propel tech stocks higher and Wall Street to fresh records yesterday while European stocks advanced as central banks made interest rate calls. A day after a public holiday, Wall Street’s S&P 500 and Nasdaq Composite pushed higher at the open yesterday from record closes on Tuesday, setting new all-time highs.

“US markets reopened after a day’s holiday and AI chip giant Nvidia continued its ascent,” said Dan Coatsworth, investment analyst at AJ Bell. Market enthusiasm for artificial intelligence has driven a surge in tech stocks, in particular for Nvidia which produces high-end processors prized for AI applications.

Nvidia’s market capitalisation edged past Microsoft on Tuesday to become the world’s most valuable publicly traded company and its shares struck a fresh record yesterday. But the gains on the Nasdaq and S&P 500 faded as the morning wore on, with analysts not convinced the rally has legs to finish the day higher.

“This morning’s economic data was aligned with an economic slowing that could raise questions about the achievability of earnings growth expectations and the Fed’s decision to keep its policy rate higher for longer,” said market analyst Patrick O’Hare at Briefing.com. Initial jobless claims for last week came in slightly higher than expected while housing starts fell.

Data showing slowing growth gives the Federal Reserve some freedom to ease monetary policy, but so far US central bank officials have indicated they wanted to see more evidence of inflation coming down before committing to an interest cut. Analysts say this means there will be two reductions at most, with many predicting just one this year in line with the Fed’s “dot plot” gauge released last week.

Central banks 

Interest rate calls by central banks in Europe animate trading across the Atlantic, helping stocks rise across the region. Switzerland’s franc dipped against the dollar after the Swiss National Bank (SNB) announced its second straight interest-rate cut, having become in March the first Western central bank to slash borrowing costs that had been raised to battle inflation.

The Bank of England (BoE) held rates steady as expected ahead of UK’s July 4 general election, as did Norway’s central bank. The BoE’s decision to keep its key rate at a 16-year high came just a day after official data showed UK headline consumer inflation had finally come down to the bank’s two percent target.

But the statement following the meeting opened the door to a rate cut in August, however, according to Kathleen Brooks, research director at trading firm XTB, pleasing the stock market but hitting the pound. “The market has taken today’s news as a step in the direction of a rate cut at the next BoE meeting. The market is now pricing in a 60 percent chance of a rate cut in August, up from a 35 percent chance before the meeting,” she said.