Global Stocks Rise to Record Levels as Iran Calms and Dollar Weakens

SadaNews - Global stocks have risen to a new record level, as investors returned strongly to the markets, driven by signals that the United States and Iran may extend the ceasefire, helping markets eliminate the risk premiums imposed by the war.

The global "MSCI" index - the broadest measure of global stocks - increased by 0.3% to reach a new record level, heading towards gains for the tenth consecutive day, marking the longest winning streak since September. Asian stocks also rose by 1.3%, nearly erasing their war-induced losses, supported by optimism regarding a potential ceasefire between the United States and Iran, alongside strong corporate earnings in the U.S.

The rise in Asian stocks came after Wall Street indices also closed at record levels, as traders bet that de-escalation in the Middle East would lead to falling oil prices and strengthen economic growth. Futures contracts for stock indices indicate that this momentum will continue in Europe.

Supporting the improved sentiment, Brent crude stabilized near $95 per barrel, significantly lower than last month's peak near $120. As tensions in the Middle East eased, the dollar - which emerged as a safe haven during the conflict - fell, with the Bloomberg spot dollar index heading to mark its ninth day of losses, the longest losing streak since December 2006.

Asia Holds onto Peace Hopes Supported by Oil

Investors returned to stocks despite ongoing uncertainty about the course of the war, amid growing expectations that the United States and Iran will continue negotiations and work to reopen the Strait of Hormuz. Renewed interest in technology stocks contributed to a strong recovery from last month's sell-off, which had pushed several indices into technical correction territory.

"Asian traders are firmly holding onto hopes that a new round of peace talks between the U.S. and Iran will materialize in the coming days," according to Tim Waterer, Chief Market Analyst at KCM Trade. He added: "Oil trading below $100, along with hopes for diplomatic breakthroughs, is reviving stocks."

The United States and Iran are considering extending the ceasefire, set to end on Tuesday, for an additional two weeks to allow more time for negotiating a peace agreement, according to a knowledgeable source.

Mediators between both sides are working to arrange technical talks to resolve the most complex issues, according to the source who requested anonymity, including reopening the Strait of Hormuz and Iran's uranium enrichment program.

What Do Bloomberg Strategists Say?

"Major indicators in Asia are experiencing a strong new session, with investors refocusing on the strength of major corporate earnings, while the war in Iran fades into the background. Moreover, the balance between short-term inflationary pressures and medium-term growth risks keeps bond yield curves stable, which is a positive factor for stocks."

— Mark Cranfield, MLIV.

Gold Rises and Silver Soars

Elsewhere, gold rose by 0.6% to around $4820 an ounce, while silver jumped by 1.5% to around $80 an ounce. U.S. Treasury bonds also rose, with the yield on 10-year benchmark bonds declining by one basis point to 4.27%, as falling oil prices alleviated fears about rising inflation.

The Australian dollar rose to its highest level since June 2022, supported by the weakness of the U.S. currency, while the yen strengthened after Japan's chief currency official, Atsushi Mimura, confirmed that Japan and the U.S. would work together on exchange rate matters. Chinese stocks also retained their gains after data showed that economic growth in the first quarter was stronger than expected.

Matthew Haupt, Portfolio Manager at Wilson Asset Management, stated: "The markets are simply returning to pre-war conditions after moving past the conflict despite it not being resolved. From now on, we need new news to push the trend upward, as systematic buying has largely been completed."

Tech Stocks Lead Wall Street

On Wall Street, technology stocks led the gains after lagging performance since the start of the year. The "S&P 500" index rose in 10 of the last 11 sessions, while the "Nasdaq 100" climbed for the eleventh consecutive session on Wednesday, marking the longest winning streak since December 2019.

Strong earnings also supported sentiment, as shares of "Bank of America" and "Morgan Stanley" rose after their stock traders reported revenues exceeding expectations.

Emerging Markets Climb

Prospects of resuming negotiations helped reinforce a general risk-on trend in the markets, as emerging market stocks continued to gain, with the "MSCI" emerging markets index climbing by 1% on Thursday.

Singapore and Taiwan indices, along with the "MSCI" Latin America index, managed to erase losses incurred after the U.S. and Israeli attacks on Iran, joined by the Chinese "CSI 300" index on Wednesday. The Taiwanese stock market also surpassed the UK in market value as technology stocks on the island rebounded amid hopes of de-escalation in the war.

Analysts at "Goldman Sachs", including Kamakshia Trivedi, wrote in a report: "The uptrend recovery led North Asian, emerging European, and Latin American markets while ASEAN and oil-importing India lagged."