Chip stocks push tech heavy indices to fresh ATHs!

00:00:00: Investors continue to flip-flop between AIE for you and Middle East headlines.

00:00:05: But for now, they remain firmly focused on earnings and technology optimism.

00:00:10: And try to minimize the Middle East news as much as possible.

00:00:14: so this MP, five hundred and nine hundred both pushed a fresh record highs yesterday with smile conductors stocks leading gains across both US and European markets.

00:00:24: at the same time geopolitical worries approach you have diminishing impact on sentiment worth investors out there increasingly brushing aside war headlines unless tensions materially escalate.

00:00:37: And the economic data is softish, but not alarming.

00:00:40: so welcome to Swissco Steady Market Talk.

00:00:43: it's Wednesday sixth of May.

00:00:45: I'm Ipekos Kardashian.

00:00:47: we will try to make sense off the news headlines, ecomic data and corporate earnings.

00:00:53: But before we do as always please keep in mind that opinions are my own.

00:00:58: this isn't financial advice.

00:01:08: So the project freedom was posed yesterday, meaning that US will not try to escort ships out of the Strait of Hormuz for a while as the letter did not fare well with Iran.

00:01:19: Now all good news is that no further escalation tensions in the Middle East were just enough to divert investors' attention towards earnings again and rally that posed for few hours at start.

00:01:31: this week resumed This.

00:01:33: MP-Five hundred and NASDAQ Hundred both pushed to fresh record highs yesterday as the European stock six hundred index rebounded from its fifth day moving average.

00:01:43: gains were led by technology names on both sides of the Atlantic Ocean.

00:01:49: Van Aks my conductor ETF for example traded at a fresh record high in US while ASML rebounded three and half percent in Europe.

00:02:02: A German chip maker, not an AI chipmaker but a chip maker still and one of the largest European chip makers rose more than eight percent to a record high before announcing it.

00:02:11: earnings.

00:02:12: This morning I haven't seen their earnings just yet But today The Cosby index also confirms that optimism with more then six-and-a half percent jump at the time i'm talking here.

00:02:24: So overall, the market mood now flops between AI optimism and Middle East news with middle east worries however impacting less as we move on and shorter period of time, as investors become used to the war headlines.

00:02:39: This is what happens in geopolitical tension periods.

00:02:42: I believe that there's still a certain ignorance and underpricing off the risk here due to impact on global oil flows.

00:02:49: but reality isn't perfect.

00:02:52: calm for entering position doesn't exist or it doesn't exist anymore.

00:02:56: We're either confronted with geopolitical crisis, trade war and high valuation.

00:03:02: So today is a mixture of all.

00:03:03: yet the major indices are doing well including EM indices because MSCI's EM index for example also hit record highs yesterday.

00:03:12: This stock rally per se looks like serving as hedge against inflation though The risk of a sharp reversal cannot be real out given uncertainties.

00:03:21: but investors just don't want to hear about.

00:03:24: And while uncertainties and worries didn't really show up in the earnings so far, more than eighty percent of S&P five hundred companies that reported their earning so far will report it better than expected revenue.

00:03:35: In Europe around forty-five per cent of the stock six hundred company surpassed a revenue expectations.

00:03:41: as good is not as good as the US.

00:03:43: and the gap is certainly due to technology exposure off these continents and indices.

00:03:48: because again yesterday AMD delivered strong earnings beat with The first quarter of revenue rising to over a year or two, more than US dollars and the data center sales surging at about fifty-seven percent thanks to booming AI infrastructure demand.

00:04:06: It was better than expected!

00:04:07: The company also guided the second quarter's revenue above expectations.

00:04:12: reinforcing Optimism around is AR accelerator and server CPU businesses.

00:04:18: The market's reaction was as positive, AMD shares jumped sixteen percent in the after-hours trading As investors cheered a strong AI driven growth outlook And improving visibility on future demand.

00:04:31: Super microcomputer on other hand also jumped around eighteen percent In the after hours trading After delivering mixed results.

00:04:39: Earnings here beat expectations comfortably helped by improving margins and strong AI survey demand, but revenue misestimates a loss as some customer deployments were delayed.

00:04:49: But the company nevertheless issued upbeat guidance for the current quarter signaling confidence that AI infrastructure spending remains robust And we do know it does remain robust.

00:05:01: Investors focus on the stronger profitability and guidance rather than their revenue, missed as a confirmation of AI led optimism that we are going through today.

00:05:14: So this morning with no further escalation in the Middle East and falling oil prices, The US and European futures are pointing at a positive start.

00:05:23: That relief is also notable In the U S dollar index that is trading lower This morning.

00:05:28: the u s dollar Is indeed lower against most majors?

00:05:32: The year dollar for example It's pushing above the one seventeen mark At the time I'm talking while the dollar yen is old All the way down to the one hundred and fifty five level, The law was in ten weeks also helped by direct effects intervention from the Ministry of Finance.

00:05:48: Indeed Japan is closed today And thin market volumes during a whole day make this kind of affects Intervention more efficient because it moves your market faster.

00:05:57: But again!

00:05:58: The letter helps clearing the speculative short positions against the Yen for awhile In the short run but not necessarily reverse the yens medium term outlook.

00:06:08: We need a BOJ hike for that or more dovish shift in other central bank expectations which would, in return require stable and sustainable easing in the Middle East tensions.

00:06:20: And ideally price of oil as well Which is scenario today That looks highly uncertain.

00:06:26: unfortunately On the economic data front The US data was mixed yesterday.

00:06:31: The ISM printed software activity In March For non manufacturing sector while job openings in the US fell less than expected on March and new home sales rose during same month compared to a month earlier.

00:06:46: Today, all eyes will be on U.S.

00:06:48: ADP report where expectations are that the US economy may have added around one hundred eighteen thousand new private jobs in April.

00:06:58: What's interesting is predictions diverge!

00:07:01: On one hand thousands of job terminations announced by big and smaller technology companies thanks to AI replacement weigh on jobs estimates.

00:07:10: On the other hand, these same companies spend hundreds of billions of US dollars for building massive AI infrastructure that creates jobs.

00:07:20: but Leather is not hitting headlines as hard as big technology job losses do so The question is whether the job losses are stronger or softer than the job gains due to AI?

00:07:32: I guess we will see in a few hours and the coming days.

00:07:36: But, The way market will process news will certainly be impacted by positive vibes of the moment meaning that a softer than expected jobs data could revive federal reserve doves pull yields lower back further equity rally while stronger than expected.

00:07:54: figures on other hand confirm US economy is not doing bad after all and cement optimism and push equities to fresh all-time high levels as well.

00:08:04: And given the resilience, bad news and enthusiasm around good news these days I certainly do not see bears taking their upper hand in coming days but selloffs happen suddenly.

00:08:19: Now, one interesting thing though before we go.

00:08:21: Some analysts note that the positive reaction to earnings beats this earning season is smaller compared with negative reactions to earnings misses.

00:08:30: The latter is a confirmation that valuations are quite high in US and US stocks are expensive.

00:08:37: whether this optimism could spread into other markets.

00:08:40: And the answer is, it depends!

00:08:42: The Middle East tensions clearly shifted capital flows toward technology names and that's true for inside and outside of the US because European & UK stock market lag behind technologies.

00:08:53: having indices like Cosby & Tykes For example, the rising energy costs first hit the Asian Indices harder but negative impacts on the market mood last longer in Europe And given investors' appetite in hiding from the war under the technologies roof, The underperformance of European indices will likely remain in play until more clarity in the Middle East and ideally a notable retreat at energy prices as well.

00:09:17: Otherwise, the European economies also face higher interest rates from the European Central Bank into a sloving economic outlook that for the cyclical European indices is not necessarily Good news.

00:09:29: So this is all for today, I'm Ipek Oskar Deshkaya and thank you for joining me!

00:09:34: And Thank You For All Your Beautiful And Supportive

00:09:36: Comments!!

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