Jenson Holmes from Titan Wealth offers this week’s round-up of global markets
GLOBAL markets navigated another eventful week, balancing geopolitical tensions in the Middle East against encouraging company results and continued enthusiasm for AI.
While geopolitical developments around Iran, Oman, the Strait of Hormuz and sharp swings in oil prices attracted significant attention, investors remained largely focused on the strength of the global economy and a fresh round of positive corporate updates.
Reports during the week suggested progress had been made in negotiations regarding reopening the strait, but markets became more cautious after news that Iran could impose greater restrictions on vessels using the waterway, such as banning US- and Israeli-flagged vessels or charging a toll.
The news resulted in another volatile week for oil prices, which initially fell on hopes of improved shipping access before rebounding as geopolitical concerns resurfaced. While energy markets remain sensitive to events in the region, the broader impact on global economic activity has so far been limited. This is thanks to the resilience of the global economy and the ability of energy users to source supplies from a range of alternative providers.
Despite this uncertainty, equity markets remained resilient as investors turned their attention to corporate earnings. Strong updates from a range of European and US companies helped push major indices back towards record highs, reinforcing confidence that economic growth and corporate profitability remain robust.
AI continued to be one of the biggest themes influencing markets. Companies linked to the growth of AI, including Meta, AMD and Micron, benefited from optimism about increasing demand for the technology and the infrastructure needed to support it.
Investors have continued to favour businesses that are seeing tangible benefits from AI-related spending. This has not been limited to technology companies. Mining groups such as Glencore and Rio Tinto also produced strong results, with their shares rising 86% and 43% respectively. Both companies have invested heavily in increasing copper production, reflecting growing demand for a metal that is essential for electrification, renewable energy projects and modern technology. Energy businesses such as BP also delivered very strong results.
Towards the end of the week, a slowdown in the US jobs market and positive data on US productivity helped US treasury yields fall from recent highs on speculation the Federal Reserve will not be forced to raise interest rates any time soon. This was despite some hawkish comments from a number of Fed members. This provided further support for equities while the dollar continued its recent trend of weakness.
Gold also staged a strong rebound this week thanks to several factors including falling bond yields, the weaker dollar and renewed central bank and retail investor buying. Gold is sensitive to rising bond yields since it pays no yield and also tends to be negatively correlated to the dollar.
The World Gold Council says central banks and sovereign wealth funds bought a record net 289 metric tonnes in the second quarter, up 62% from the same period last year.
