Global Markets React to Middle East Tensions and Strong Tech Earnings Ahead of Tel Aviv Opening
Trading in Tel Aviv is set to open amid heightened geopolitical tensions following an Iranian attack on US bases in Kuwait and a US announcement of a historic peace deal in Gaza. Despite the unrest, oil prices are falling due to improved crude flow through the Strait of Hormuz, easing supply disruption fears. Dual-listed stocks in Tel Aviv show a positive arbitrage gap, led by gains in Teva, NICE, Elbit Systems, and ICL, while some chip stocks like Tower and Nova show slight declines.
Asian markets display mixed but mostly strong gains, with South Korea's Kospi surging over 15% driven by SK Hynix and Samsung amid AI sector recovery. US futures are up, reflecting a rebound after Wall Street's sharp tech and chip stock rally, where the Nasdaq rose 2.5% and the SOXX semiconductor index jumped 8%. Microsoft surged 17%, adding $480 billion in market value in one day, while Meta Platforms fell sharply after disappointing forecasts.
In bond markets, US long-term yields hit a 19-year high amid renewed US-Iran tensions, while short-term yields rose modestly. The Tel Aviv Stock Exchange introduced new liquidity criteria for bond indices, potentially removing some series from major indices in August. The shekel weakened initially but recovered against the dollar by 0.7% by market close.
Currency markets saw a dramatic 2% surge in the Japanese yen against the dollar, sparking speculation of intervention by Japanese authorities ahead of the Bank of Japan's decision to keep rates steady at 1%. Oil prices stabilized after recent volatility but declined this morning, with WTI down 2.23% to $81.73 per barrel and Brent down 1.75% to $87.47.
US macro data showed mixed signals: Q2 GDP growth was 1.5% annualized, below expectations, while inflation measures remained above the Fed's target. The Bank of Japan signaled readiness to accelerate rate hikes. Upcoming earnings reports include SpaceX's first public filing, Palantir, Eli Lilly, Sandisk, McDonald's, and Israeli companies Tower Semiconductor, Wix, and Nova.
Strategist Ed Yardeni highlighted the Dow Theory's bullish signals, noting that both the Dow Jones Industrial and Transportation averages remain near all-time highs, supported by AI-driven demand for transportation and industrial goods. The iShares Transportation ETF has outperformed the S&P 500 significantly this year. Meanwhile, the Israeli conglomerate Leumi presented a socio-economic vision for improving quality of life in Israel.