Global markets rally as tech stocks gain despite hotter-than-expected US producer inflation

Burhan Sansarlioglu and Emir Yildirim

Global markets traded on a positive trend on Thursday with declining government bond yields and a recovery in tech stocks that had plummeted the previous day.

US macroeconomic data continue to set the direction of global markets.

The monthly Producer Price Index (PPI) in the US rose 1.3% in September, while surging 6.3% annually, faster than expected.

US producer inflation reached its highest level since March 2022 on a monthly basis and since December 2022 year-on-year.

Hotter-than-expected consumer inflation combined with the acceleration in producer inflation, fueling growing concerns that the US Federal Reserve may hike rates.

US retail sales rose above expectations by 0.8% on a monthly basis in September, reinforcing expectations that the Fed will continue its tight monetary policy.

The negative trend in tech stocks due to concerns over artificial intelligence investment profitability reversed following statements by Fed Chair Kevin Warsh.

Lingering concerns over the broader technology sector fueling worries about economic growth prompted investors to turn to bonds, dropping bond yields.

The US 10-Year Treasury yield fell 11 basis points on Thursday to 5.08%, while it is trading flat on Friday.

The US dollar fell 0.2% to 101.9, while gold is trading just above its previous close at $4,171 per ounce on Friday.

December-delivery Brent crude is down 0.5% at $105.4 a barrel on Friday after the International Energy Agency (IEA) reached an agreement to release more than 20 million barrels of diesel into the market, in addition to the remaining oil that was released at a record level from the emergency reserve.

Major chipmaker stocks down

The US Treasury Department added some 16 people and 10 entities allegedly linked to Iran to its sanctions list to further block Tehran’s access to the global financial system.

Meanwhile, the New York Stock Exchange traded positively on Thursday, led by gains in healthcare sectors, which also helped offset declines in tech stocks.

Shares of chipmakers Nvidia, AMD, and Intel declined 2%, 1.5%, and 3%, respectively.

Pharmaceutical giant Eli Lily’s shares gained 3.5%, health insurer UnitedHealth shares rose 2.8%, and retail titan Walmart’s shares grew 1.5%.

At the same time, top executives at SpaceX and Tesla are reportedly considering a merger, according to a Barclays analysis, driving SpaceX shares down 2.3% and Tesla shares to drop 1.3%.

Additionally, the US initial jobless claims rose to 199,000 in the week ending Oct. 10, coming in within estimates.

The Dow Jones Industrial Average gained 1.08%, the S&P 500 rose 0.33%, and the Nasdaq Composite was up 0.08% on Thursday. American indexes started Friday on a positive trend.

Meanwhile, European stock markets traded mostly positively with strong corporate earnings and gains in healthcare companies.

The UK’s economy grew above estimates by 0.1% month-on-month and 2.1% year-on-year, driving up the British pound/US dollar exchange rate to 1.33 on Friday, its highest since Sept. 30.

The eurozone’s industrial production fell 0.5% on a monthly basis and 1.1% year-on-year in August, above estimates.

Germany’s DAX 40 gained 0.33%, the UK’s FTSE 100 rose 1.08%, and France’s CAC 40 was up 0.78% on Thursday, while Italy’s FTSE MIB 30 fell 0.72%. European indexes started Friday on a positive note.

Near Friday’s close, Asian equity markets traded higher amid a recovery in tech stocks.

SK Hynix shares surged 3.8%, Samsung Electronics rose 4.6%, Kioxia grew 3.2%, and Sony’s shares were up 2.4%.

South Korea’s Kospi rose 3.9%, Japan’s Nikkei 225 gained 2%, Hong Kong’s Hang Seng climbed 1.1%, and China’s Shanghai Composite was up 1%.