By Elizabeth Howcroft
PARIS, Aug 6 (Reuters) – Investor sentiment rebounded on Thursday, as optimism about company earnings drove stock markets to new highs and traders interpreted a proposed deal between Iran and Oman as progress towards ending the U.S.-Iran conflict.
Stock markets faltered on Wall Street overnight and during Asian trading hours, as investors turned cautious about AI spending, and some earnings – including chipmakers Sandisk and Advanced Micro Devices and data storage company Western Digital – failed to meet investors’ lofty expectations.
But the rally resumed as European markets opened, with the pan-Europen STOXX 600 touching an all-time high, driven by media and telecoms stocks. It was last up 0.4% on the day at 0912 GMT, while London’s FTSE 100 was up 0.3%, France’s CAC 40 was up 0.8% and Germany’s DAX was up 0.1%.
Hani Redha, multi-asset portfolio manager at MetLife, said the overnight losses were a natural correction to a rally that was set to continue. Strong earnings and renewed enthusiasm for AI-related tech stocks have pushed Wall Street to record highs in recent sessions.
“This is just part of an overall hangover from a tremendous party we’ve had in the market over the last few trading sessions,” he said.
“We remain pretty constructive… I don’t expect the pace of returns that we saw over the last few weeks, but we should be still in a market environment which is conducive for risk assets, equities in particular.”
PROPOSED IRAN-OMAN DEAL
Oil prices fell below $80 a barrel after Reuters reported a proposed deal between Iran and Oman to help end the U.S.-Iran conflict, which could give Tehran control over ships entering the Gulf through the Strait of Hormuz. The U.S. did not comment on the proposal, which would be one of the biggest concessions to Iran yet.
Still, traders remained cautious, and Brent crude futures were up 0.3% on the day at $79.70 a barrel while U.S. West Texas Intermediate futures were up 0.2% at $75.37.
MetLife’s Redha said that although the U.S.-Iran conflict has been one of the main factors influencing markets this year, along with AI spending, the market was becoming less sensitive to it.
“Overall, we’ve been less concerned, I’d say, about what look like negative developments from that region. It is a headwind when oil prices do spike, but we don’t think that they’re going to derail the cycle,” he said.
MARKETS WAIT FOR PAYROLLS DATA
Euro zone government bond yields were steady, with the benchmark 10-year German yield up by less than one basis point, at 3.1118%. Nearly €13 billion ($15.00 billion) of French government bonds are set to hit the market later in the session.
Currency markets were also calm. The euro was down by less than 0.1% at $1.1540, while the U.S. dollar index was up 0.1% on the day at 99.767.
The Japanese yen was at 157.85 yen per dollar, having declined slightly over the last two sessions and given back some of the gains it reached after the U.S. and Japanese governments intervened in the market on Friday.
Investors await U.S. payroll data, due later in the session, to give an indication of the Federal Reserve’s plan for interest rates.
Federal Reserve Bank of San Francisco President Mary Daly – who is not a voting member of the Federal Open Market Committee – said on Wednesday she was “completely supportive” of the decision last week to hold interest rates steady as the central bank gathers more data about how it should respond to inflation that is well above its 2% target.
($1 = 0.8664 euros)
(Reporting by Elizabeth Howcroft; editing by Barbara Lewis)
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