Key Takeaways
- Global risk appetite strengthened on optimism around artificial‑intelligence (AI) and technology stocks, driven by robust earnings from Alphabet, IBM and Tesla.
- Geopolitical tension in the Middle East, especially the US‑Iran standoff over the Strait of Hormuz, kept upward pressure on oil prices and raised inflation fears.
- Markets are pricing a near‑certain Federal Reserve rate hike to 3.75‑4 % in September, with a two‑thirds chance of another increase in December.
- The European Central Bank is expected to hold rates steady, while European equities edged higher on AI‑led tech gains but opened lower on Thursday.
- Asian semiconductor shares rose on expectations of continued AI spending, except for China, where a sell‑off followed allegations of technology transfer.
Risk Appetite Boosted by AI‑Driven Tech Optimism
Investors worldwide showed a renewed willingness to take on risk as enthusiasm for artificial‑intelligence (AI) and related technologies surged. “Risk appetite in global markets grew amid the positive outlook on growth driven by technology and artificial intelligence (AI) stocks,” the report notes, highlighting how AI narratives have become a central catalyst for market sentiment. The optimism was further reinforced by strong second‑quarter results from major U.S. tech firms, signalling that AI‑related capital expenditures will remain vigorous.
Alphabet’s Stellar Quarter Fuels AI Confidence
Alphabet delivered a standout performance, with revenue jumping 24 % year‑on‑year to $118.8 billion and net income soaring 298 % to $112.1 billion, up from $28.2 billion a year earlier. The company’s earnings release underscored the scale of its AI‑centric growth engine. Despite the stellar numbers, Alphabet’s shares slipped roughly 3 % in after‑hours trading after it announced plans to increase capital spending, a move that some investors interpreted as a near‑term drag on margins.
IBM Doubles Down on AI and Automation
IBM’s results were more modest but still pointed to a strategic shift toward AI. Revenue rose 1 % to $17.2 billion, while net income edged down 1 % to $2.17 billion. CEO Arvind Krishna emphasized that the firm is “taking steps to boost revenue growth and profitability with AI and automation investments,” indicating that even modest top‑line gains are being paired with longer‑term bets on intelligent automation.
Tesla’s Revenue Growth Contrasted by Profit Pressure
Tesla’s second‑quarter figures highlighted the divergent trends of top‑line expansion versus bottom‑line strain. Revenue climbed 26 % to $28.2 billion, yet net income fell 5 % to $1.11 billion. The disparity underscores ongoing pressure on Tesla’s profitability as it scales production, invests in new model rollouts while facing higher input‑mixed with AI‑driven optimism.""" in new factories, and contends with competitive pricing pressures in the electric‑vehicle market.
Middle East Tensions Keep Oil Prices Elevated
Geopolitical risk in the Middle East continued to act as a counterweight to the tech‑fuelled risk appetite. Ongoing military activity and the US‑Iran standoff over the Strait of Hormuz kept traders nervous about potential supply disruptions. “Concerns persisted over the geopolitical risks spilling over beyond the Strait of Hormuz to other major trade routes due to the US‑Iran conflict in the region,” the article warns. In a notable statement, US President Donald Trump warned that Washington would “bomb a bridge or power plant in or near Tehran if Iran were to fire a missile, rocket, drone, or any other weapon at a vessel in the Strait of Hormuz,” underscoring the willingness to use force to prevent Iran from acquiring nuclear weapons.
Oil Prices Surge, Inflation Fears Rise
Brent crude reacted sharply to the supply concerns, climbing to its highest level since June 11 at $92.4 a barrel and hovering around $92 a barrel on Thursday, up 1.5 %. Analysts warned that resurging oil prices could “fuel inflationary pressures and could also heighten the expectations for Fed rate hikes.” The market’s reaction reflected a dual narrative: while higher energy costs threaten to stoke inflation, they also reinforce expectations that central banks will maintain a tightening bias.
Federal Reserve Policy Expectations Near Certainty
Money‑market data showed the probability of the Fed raising its policy rate to the 3.75‑4 % band in September had risen to 98 %, with a 68 % chance of an additional hike in December. The US two‑year Treasury yield tested its February 14, 2025 high, reaching 4.32 % before settling at 4.31 %, while the 10‑year yield climbed three basis points to 4.66 % on Wednesday and stood at 4.67 % on Thursday—its highest level in two months. The US Dollar Index remained steady near 101, and gold slipped 0.2 % to $4,121 per ounce as investors gravitated toward higher‑yielding bonds amid the rate‑hike outlook.
European Markets Await ECB Decision
While US yields climbed, European equity markets traded positively on Wednesday, buoyed by the same AI‑driven tech optimism that lifted US stocks. However, attention quickly shifted to the European Central Bank’s monetary policy decision scheduled for Thursday. ECB President Christine Lagarde’s forthcoming assessment of inflation, energy prices, and geopolitical risks will be pivotal in shaping the region’s direction. Analysts broadly expect the ECB to maintain rates unchanged, though the outcome will depend heavily on how the central bank weighs the competing pressures of stubborn inflation versus growth concerns.
UK Inflation Softens, EU Backs Ukraine Funding
In the United Kingdom, annual inflation came in at 2.6 % in June—below the anticipated 2.7 % and marking the lowest reading since March 2025. Meanwhile, EU member states approved the UK’s participation in a €90 billion ($102.8 billion) loan program designed to meet Ukraine’s urgent defense needs in 2026 and 2027. European stock indices reacted favorably to the news, with the FTSE 100 up 1.24 %, the CAC 40 gaining 0.89 %, the FTSE MIB 30 rising 0.97 %, and the DAX 40 advancing 0.58 % on Wednesday. However, all major European indexes opened Thursday in negative territory as investors digested the forthcoming ECB verdict.
Asia’s Semiconductor Rally, China’s Sell‑off
Across Asia, a buying trend emerged in most markets, propelled by expectations that AI spending will continue to underpin demand for semiconductors. Japan’s Rohm Ltd. shares rose 3 %, Renesas Electronics climbed 1.5 %, and South Korea’s SK Hynix jumped 5.2 %. Near Thursday’s close, the Nikkei 225 added 0.6 %, the Kospi increased 3.7 %, and the Hang Seng rose 1.3 %. In contrast, Chinese equities faced a sell‑off after allegations that Chinese firm Moonshot AI had transferred technology from US‑based Anthropic’s Fable model, prompting the Shanghai Composite to slip 0.2 %. The divergence highlighted how geopolitical and intellectual‑property concerns can outweigh broader regional optimism in specific markets.
Overall Market Outlook
The current environment reflects a tug‑of‑war between two powerful forces: on one side, the transformative promise of AI and technology is driving robust earnings, boosting risk appetite, and lifting equity markets, especially in the US and parts of Asia; on the other, persistent Middle‑East tensions are keeping oil prices elevated, reviving inflation fears, and reinforcing expectations of further monetary tightening by the Fed and caution from the ECB. Investors will need to navigate this mixed landscape, weighing the growth potential of AI‑linked sectors against the macro‑economic headwinds posed by energy prices and geopolitical instability. As the forthcoming Fed and ECB decisions loom, market participants will watch closely for any shifts in tone that could tip the balance toward either sustained risk‑on sentiment or a more defensive stance.
https://www.aa.com.tr/en/economy/global-markets-enjoy-tech-artificial-intelligence-gains-ahead-of-major-interest-rate-decisions/4006876