Global Markets Brace for AI Fears, Rising Oil Prices, and Fed Decision
Global stock markets opened under pressure as concerns over AI safety, climbing oil prices, and rising bond yields weighed on investor sentiment. Futures for Wall Street indicated slight declines, following a negative close on the previous day. Israeli dual-listed stocks were expected to open with minor losses, with Tower Semiconductor anticipated to fall over 4%, Nova by about 2.9%, and Camtek by around 2%. Conversely, Palo Alto Networks and Teva were projected to gain over 2% each.
Asian markets also traded lower, with Tokyo, Hong Kong, Shanghai, and Seoul all experiencing declines. The Tel Aviv Stock Exchange closed with minimal changes the previous day, as the TA-35 index edged up slightly while the TA-90 index finished just below its base level. Declines were led by the Cleantech and Technology indices, while the Banking, Finance, and Insurance indices saw gains.
Local chip stocks, Tower and Nova, were particularly affected by negative sentiment on Wall Street. The controversy surrounding AI safety, with calls from leaders at Anthropic, OpenAI, and xAI to slow down the development of advanced language models, has fueled concerns about potential impacts on industry investments. Conversely, Eretz Industries surged over 12% following significant business developments for its subsidiary, and cybersecurity firm Palo Alto Networks also saw a substantial jump, benefiting from positive trends in the sector on Wall Street. Teva Pharmaceutical's stock rose after completing its transition to direct trading of ordinary shares on the New York Stock Exchange.
US bond markets saw the 10-year Treasury yield briefly cross the 5% threshold, a level not seen since 2007, driven by rising US debt, oil prices, and inflation fears. This trend also impacted Israel's domestic bond market, with investors selling Israeli government bonds, leading to a drop in the general Tel Aviv bond index and a rise in its implied yield. Oil prices continued to climb amid ongoing Houthi attacks and concerns over supply disruptions, with Brent crude trading around $107 per barrel and WTI around $102.
In Israel, the August Consumer Price Index is expected to show a significant increase, potentially pushing the annual inflation rate towards 1.8%. This inflationary environment could limit the Bank of Israel's maneuvering room for future interest rate decisions. Investors are also closely awaiting the US Federal Reserve's interest rate decision, with a quarter-point hike widely anticipated. The key focus will be on whether Fed Chair Jerome Powell signals further rate increases, which could clash with President Trump's calls for lower rates.