MORNING BID: Hormuz and hyperscalers

A Look at the Day Ahead in European and Global Markets from Tom Westbrook

While U.S.-Iran talks have stalled and little oil continues to flow through the Strait of Hormuz, global stock markets have shifted their attention back to the ongoing boom in artificial intelligence.

AI-related supply chain stocks pushed markets in Japan, South Korea, and Taiwan to record highs on Monday, driven by strong buying momentum following Intel’s unexpectedly robust revenue forecast.

With G10 central banks widely expected to keep interest rates unchanged this week, and an uneasy ceasefire still holding in the Middle East, investor focus is now centered on the key driver of recent equity gains: hyperscalers’ spending plans, which will be closely watched in upcoming earnings reports later this week.

Asia’s major chipmakers reported record earnings last week. SK Hynix posted a fivefold jump in quarterly profit, while Samsung Electronics projected an eightfold increase in operating profit, reaching nearly $38 billion for the January to March period.

Taiwan Semiconductor Manufacturing Company (TSMC) also reported record first-quarter profit and has now posted eight consecutive quarters of double-digit growth. Despite already strong gains, chip-related stocks continue to surge, with SK Hynix shares nearly doubling so far this year. The combined market value of South Korean and Taiwanese equities has now surpassed Germany’s, according to the World Federation of Exchanges.

On the geopolitical front, an Axios report indicating that Iran has proposed conditions for reopening the Strait of Hormuz and separating nuclear negotiations for a later stage helped support market sentiment on Monday.

In Europe, attention will turn to German consumer sentiment data for May, which could influence expectations around interest rate policy ahead of upcoming European Central Bank and Bank of England meetings. Investors may also begin adjusting positions that have been heavily weighted toward expectations of near-term rate hikes.

Key developments that could influence markets on Monday include:

U.S.–Iran peace talks

German consumer sentiment for May

Corporate earnings from Deutsche Börse, Verizon, and Domino’s Pizza

SK Hynix reported record quarterly operating profit. -Editing by Kate Mayberry/Reuters