- After a technical correction, global equity assets saw bargain hunting and consolidation, with U.S. stock futures rising across the board. The AI infrastructure sector led the gains, driven by a 1.2% pre-market rise in Nvidia (NVDA:US).
- Asia-Pacific assets showed significant divergence. The People's Bank of China (PBOC) cut liquidity tool rates, boosting a strong rebound in Greater China stocks, while South Korean stocks were pressured by concerns over funding costs following the announcement of massive semiconductor capital expenditure plans.
- Geopolitical premiums and monetary policy uncertainties intertwined, with shipping disruptions in the Strait of Hormuz pushing Brent crude to $73. The U.S. Treasury yield curve shifted upward, as the market awaited the European Central Bank (ECB) Sintra Forum and the U.S. non-farm payroll report.
Reassessment of Tech Infrastructure Demand Triggers Short Covering
After a phase of valuation corrections in popular tech stocks last week, institutional funds showed signs of reallocating risk assets at the start of the week. S&P 500 futures rose 0.8%, and Nasdaq 100 futures increased 1.1%, indicating a temporary exhaustion of selling momentum. Nvidia (NVDA:US) rose about 1.2% in pre-market trading, suggesting that expectations for marginal demand for AI hardware infrastructure remain solid. In contrast, the European market saw the Stoxx 600 index dip slightly by 0.1%. Although the tech sector followed U.S. stock futures higher, weakness in the banking and automotive sectors eroded overall gains, reflecting ongoing uncertainties in the recovery momentum of Europe's domestic cyclical industries. The German DAX index remained relatively firm, edging up 0.2% and maintaining a narrow range.
Central Bank Liquidity Injection and Divergence in East Asian Equity Markets
Major stock indices in the Asia-Pacific region showed significant heterogeneity at the start of the week. China's Shanghai Composite Index and Hong Kong's Hang Seng Index recorded gains of 1.2% and 1.95%, respectively, primarily driven by the PBOC's unexpected rate cut on liquidity tools. This move effectively alleviated concerns about end-of-quarter liquidity tightness and improved the marginal funding costs for non-bank financial institutions. However, South Korea's KOSPI index fell 0.2% against the trend. Despite Samsung Electronics (000593:KS) and SK Hynix (000660:KS) jointly announcing a next-generation memory expansion plan totaling approximately $1.3 trillion, short-term pressure from massive capital expenditures (Capex) and expectations of cash flow dilution led investors to take profits, causing their stock prices to fall by 4.8% and 1.7%, respectively.
Resurgence of Geopolitical Shipping Premiums and Bond Market Rate Hike Pricing
The commodities and fixed income markets reflected deeper macro risks. Although the U.S. and Iran reached a temporary consensus and agreed to pause retaliatory actions, the aftermath of a previous attack on a supertanker near the Strait of Hormuz continued to unfold, with marginal slowdowns in shipping logistics efficiency pushing Brent crude prices up 1.4%, returning to the $73 per barrel range. Due to inflation expectations implied by energy prices and concerns over potential supply chain disruptions, U.S. Treasury yields rose across the board. The 2-year Treasury yield increased by 1.6 basis points to 4.103%, and the 10-year yield rose by 2 basis points to 4.38%. If the U.S. non-farm payroll data released this Thursday exceeds expectations, the fixed income market's pricing for the Federal Reserve (Fed) maintaining high interest rates may further strengthen.
