The past week started off on a relatively calm note, but quickly turned volatile after Israel’s overnight strike on Iran. This event had a significant impact on the financial markets, with three key themes defining the week.
1. Geopolitics: The attack on Iranian nuclear infrastructure sent shockwaves through global markets, leading to a sell-off in U.S. stocks on Friday. The S&P 500 and Nasdaq Composite both experienced significant losses, while Brent and West Texas Intermediate crude futures saw a sharp increase. Gold also rose to a two-month high as investors sought safe-haven assets. Prior to the attack, stock benchmarks were on track for a positive week, but ended in the red. The U.S. dollar index struggled throughout the week, reflecting the market’s uncertainty.
Another major geopolitical event was the announcement of a trade-deal framework between the U.S. and China, focusing on rare-earth minerals.
2. Economic data: Amidst the geopolitical turmoil, investors received positive news on the inflation front. Both the consumer price index and producer price index came in lower than expected, indicating subdued inflation levels. The labor market showed signs of softening, with unchanged weekly jobless claims and continuing claims remaining high. Overall, the economic data was encouraging, with inflation under control and unemployment remaining low.
3. AI updates: The week also saw significant developments in the artificial intelligence space. Apple’s annual worldwide developer conference disappointed investors due to a lack of AI updates. Meta Platforms made headlines by investing in Scale AI and launching a new “superintelligence” unit. Nvidia CEO Jensen Huang emphasized the need for increased compute capacity, especially in Europe. Oracle and Advanced Micro Devices also made strides in AI, with Oracle reporting strong quarterly results and AMD unveiling a new AI server chip.
The market’s reaction to these events was mixed, with Oracle’s stock performing exceptionally well despite the broader market sell-off. As the AI race continues to drive financial markets, investors will be closely watching for further developments in this space.
