Global stock markets collectively rebounded, driven by bargain hunting in tech stocks, with semiconductor giants like ASML and Infineon leading the gains in European markets. Meanwhile, ChatGPT developer OpenAI secretly submitted an IPO application in the US, and SpaceX is set to make its market debut this week, bringing the AI boom back into the spotlight of global capital markets.
Signs of easing geopolitical tensions emerged as Israel and Iran reached a temporary agreement to halt mutual attacks, causing Brent crude futures prices to fall. Despite the current maritime traffic in the Strait of Hormuz remaining below normal levels, international oil prices are still maintaining a relatively high level above $90 per barrel in the short term.
The borrowing costs of major global economies continue to rise, with the US 10-year Treasury yield surpassing the 4.5% mark. Strong non-farm employment data has heightened expectations of a Fed rate hike this year, pushing the USD/JPY exchange rate to around 160.2, prompting Japanese Ministry of Finance officials to issue a verbal warning of decisive intervention.
Accelerated IPOs of Tech Giants and Valuation Reassessment Challenges
The European Stoxx 600 index rose by 0.7%, with the tech sector performing prominently. In pre-market trading in the US, stocks of major companies like Meta, Eli Lilly, and Goldman Sachs all rose by about 1%. The market is currently highly focused on major developments in the tech sector, not only with OpenAI's secret IPO application but also with SpaceX's market debut. However, analysts have expressed caution, stating that these giant companies must maintain extremely high growth rates in future earnings to support the current high valuation level of 56 times forward P/E ratio. Oracle's earnings report, set to be released on Wednesday, will be the next key indicator to verify the sustainability of high valuations in tech stocks.
Rising Bond Yields and Global Inflation Risks Resonance
Investors remain highly vigilant about the systemic risks posed by rising global borrowing costs. According to data from the London Stock Exchange Group, the number of days the US 30-year Treasury yield has stayed above 5% this year has set a record since 2007. Analysts at Bank of America point out that among the 68 central banks monitored globally, 46 still have inflation rates above their set targets, indicating that global inflation stubbornness remains at a high level. This fundamental is prompting a repricing in global bond markets to reflect potential policy tightening risks, leading to continued pressure on long-term assets, private credit, and some emerging market currencies. Additionally, BofA's global breadth rule indicates that nearly half of the world's stock markets have entered overbought territory, with the phenomenon most pronounced in South Korea, Taiwan, and Finland.
Strengthening Expectations of Fed and ECB Rate Hikes
Due to the strong overall performance of the US May non-farm employment report, the market has priced in about a 60% probability of a Fed rate hike as early as October, while the expectation of a 25 basis point hike in December has been almost fully absorbed. The US dollar index has risen by about 2% over the past four weeks. The US Consumer Price Index data, set to be released on Wednesday, is expected to further reflect the impact of rising energy costs on overall inflation. If core inflation shows an unexpected rebound, market pricing of policy rates may face further reassessment. Meanwhile, the European Central Bank is also under pressure to tighten policy, with the market having fully absorbed the expectation of a 25 basis point hike to 2.25% at its Thursday meeting, and it is expected that its benchmark rate may further rise to 2.5% or 2.75% by the end of 2026.
Forex Market Faces Policy Intervention and Commodity Price Decline
Supported by a strong US job market and Fed rate hike expectations, the USD/JPY exchange rate is currently maintaining around 160.2 yen, a level that has surpassed the previously widely believed 160 threshold that could trigger official market intervention. Japanese Finance Minister Katayama Satsuki publicly stated that officials are ready to take decisive action to address excessive exchange rate volatility. Among non-US currencies, the euro has slightly rebounded to $1.157, and the pound has also risen. In the commodities sector, due to eased Middle East tensions, Brent crude futures prices fell by 2.1% to $92.3 per barrel. Although oil prices have retreated from the late April high of $126 per barrel, the current price level is still nearly 30% higher than in late February this year, indicating that inflationary pressures in the commodities sector remain difficult to fully dissipate in the short term.
