By Amanda Cooper
LONDON, June 30 (Reuters) – Global stocks were headed for their best second-quarter performance in six years on Tuesday, while a resurgent dollar pushed the yen to a four-decade low and was headed for a fourth straight quarterly rise.
Within the past three months, the Strait of Hormuz has re-opened gradually and haphazardly as hostilities between the U.S. and Iran receded into a fragile ceasefire, knocking 20% off the price of oil. In addition, a dramatic shift in expectations for U.S. interest rates has occurred, against a backdrop of a seemingly unstoppable boom in artificial intelligence stocks.
The MSCI All-World index has risen almost 14% to record highs in the last three months, marking its best second-quarter performance since 2020.
Most of the gains have been powered by a scorching rally in anything AI-related, particularly in Asian markets, where indexes in Japan, South Korea and Taiwan have logged double-digit percentage gains. The S&P 500 is also up 14% and the Nasdaq, which welcomed $2 trillion SpaceX to its ranks in June, has gained 20%.
“The one theme that’s disappeared largely is monetary policy support,” said Guy Miller, chief market strategist at Zurich Insurance Group. “At the beginning of the year, the futures market was pricing further rate cuts. Now, that’s changed. And that’s been a function largely of the situation with Iran and the higher commodity prices.”
“The take-away for us, however, is that while we’re not expecting further cuts from the central banks, we’re not expecting a start of a hiking cycle as such.”
Europe’s STOXX 600, which does not have nearly as many AI beneficiaries as many Asian or U.S. indexes, was up 1.1%, heading for a quarterly gain of 10%, having risen every month since March.
U.S. stock futures were up between 0.1% and 0.2%, suggesting a modest increase at the opening bell later.
THE WINNING DOLLAR
The dollar has been the standout winner this quarter in the foreign exchange market, gaining 1.4% against a basket of major currencies.
Investors are amassing bullish positions at a record pace thanks to a remarkable re-pricing of the U.S. interest rate outlook, which has flipped from cuts to hikes, due to the surprising strength of the U.S. economy and persistent inflationary pressures beyond energy prices.
The dollar’s rise has driven gold to its largest quarterly fall in more than a decade, while the yen has been driven to its weakest point in 40 years to trade around 162.38 per dollar on Tuesday. Traders were already on edge about possible Japanese intervention, with Finance Minister Satsuki Katayama issuing another warning.
Source: finance.yahoo.com
