Global Markets Open Week in Red Amid Iran Tensions and AI Growth Fears
Global markets commenced the trading week with declines, influenced by escalating tensions between the United States and Iran, alongside renewed concerns over the pace of Artificial Intelligence (AI) development. Leaders from AI firms Anthropic, OpenAI, and xAI reportedly supported a slowdown in advanced AI model development, sparking fears of reduced investment in the sector. Investors are also anticipating a busy week for macroeconomic data and interest rate decisions from major central banks, including the US Federal Reserve, the Bank of England, and the Bank of Japan.
Brent crude oil prices surged by 3% to $107.79 per barrel following a drone attack that led Saudi Arabia to shut down a major oil pipeline. A planned meeting between Iran and Gulf states was also postponed. Asian markets showed mixed performance, with Tokyo's Nikkei 225 down 0.8%, South Korea's Kospi losing 2%, and Hong Kong's Hang Seng rising 0.3%. China's Shanghai Composite traded flat. Chip stocks, including SK Hynix and Samsung Electronics in South Korea, and SMIC in Hong Kong, led the declines in Asia. In Japan, SoftBank's stock plummeted 13% after OpenAI's CEO indicated the company would not go public this year, impacting SoftBank's significant investment.
US stock futures pointed to a lower open on Wall Street, with Nasdaq futures down 1.2% and S&P 500 futures off 0.4%. Last week, rising oil prices weighed on major US indices, with the Dow Jones experiencing its sharpest weekly drop since March, while the S&P 500 and Nasdaq also saw losses. The Federal Reserve is set to announce its September interest rate decision on Wednesday, with markets pricing in an 86% chance of a rate hike.
The Tel Aviv Stock Exchange opened the new civil year with optimism, following a strong performance in the previous year where the TA-125 index rose approximately 37%. However, the local market is expected to be influenced by global trends. Dual-listed Israeli companies showed mixed opening price differences, including Palo Alto Networks, Ormat, ICL, Camtek, and Teva. Altshuler Shaham is expected to be a focus following reports that WeSure is acquiring it. The Tel Aviv trading week will be shortened due to the upcoming Yom Kippur holiday.
Israeli inflation data will be released on Tuesday, preceding the next interest rate decision. Analysts are drawing parallels between current market conditions, including rising bond yields and oil prices, and the late 1990s dot-com bubble, though many Wall Street strategists still recommend holding stocks. They point to the resilience of tech stocks during periods of rising interest rates and bond yields, citing the Nasdaq 100's performance between 1999 and 2000. The current argument for holding stocks centers on corporate earnings, with S&P 500 companies projected to report a third consecutive quarter of over 20% profit growth. Strategists advise focusing on profitable growth companies and diversifying into commodities like gold as a hedge against inflation.