Stocks steady after tech rout, Brent falls below US$75

NEW YORK: Stock markets rebounded slightly Wednesday from the previous day’s rout in technology shares, caused by concerns over massive AI spending even as borrowing costs are rising.

Wall Street indexes opened mixed, following advances across most equity markets in Asia and Europe.

Oil prices fell further as shipping traffic through the Strait of Hormuz picked up, with Brent crude edging below US$75 a barrel for the first time since the start of the Middle East war.

The US benchmark West Texas Intermediate fell below US$70, also a first since the Middle East war began in late February.

Investors remain uncertain, however, about any future Iranian fees for transiting the crucial Gulf strait, and demand is likely to remain strong as countries rebuild strategic reserves unloaded during the crisis.

“Inventories remain low, so the downside is not unlimited, but the normalisation of shipping flows has eased fears of a major supply disruption,” said Patrick Munnelly, market strategist at Tickmill Group.

In Asia, Seoul’s Kospi index added more than 3% after a 10% collapse Tuesday led by losses for chip giants SK hynix and Samsung after their recent string of record highs.

There were also gains in Hong Kong and Shanghai Wednesday, though Tokyo once more ended lower.

“The global tech sell-off appears to have started to stabilise, but investors remain super-cautious, nervous that high valuations could be chipped away at again,” said Susannah Streeter, chief investment strategist at Wealth Club.

While no specific catalyst was blamed for the selling, analysts cited questions over when firms will see a return on the trillions that have been invested in all things AI, and the prospect of a US interest rate hike that is boosting the dollar.

SK hynix announced, meanwhile, that it planned to raise US$29 billion through a listing on Wall Street’s tech-heavy Nasdaq index.

European stock markets mostly rose, though Frankfurt was pulled down by an almost 17% fall in German defence giant Rheinmetall after Berlin scrapped a multibillion-euro plan to build six new frigates for its navy.

French-German tank maker KNDS, meanwhile, said it would launch a stock market flotation in Paris and Frankfurt within weeks in what could be Europe’s biggest defence sector IPO in years.

Eyes turn later in the day to the release of earnings from US chipmaker Micron Technology, which will provide a fresh idea about the state of demand in the sector and whether the AI rally still has legs.

“The next-stage debate on AI investing is not whether the theme is real, but whether the scale of investment will ultimately generate the returns that investors expect,” said Christoffer Enemaerke at RBC BlueBay Asset Management.

On currency markets, the dollar continued its advance spurred by last week’s Federal Reserve meeting, when new chairman Kevin Warsh signalled that fighting inflation spurred by soaring oil and gas prices would be his priority.

Traders took that to mean interest rate hikes could be on the cards as soon as September, spurring demand for the greenback as US Treasury yields become more attractive.

“The dollar has climbed to a seven-month high as investors seek safety amid equity volatility,” said Munnelly, noting that investors will be looking at US inflation data Thursday for clues as to the timing of any rate increase.

But the prospect of higher US rates cut into gold’s status as a safe-haven investment, with its price falling below US$4,000 for the first time since November.

The precious metal surged in January to a record high of over US$5,600 as US President Donald Trump ramped up geopolitical tensions with his threatened military strike on Iran.