Nasdaq caps strongest quarter since 2020 as AI optimism outweighs inflation fears

NEW YORK, July 1 — The tech-rich Nasdaq capped its best quarter in six years yesterday, rising with other US indices as bullishness over artificial intelligence overcame worries over geopolitics and inflation.

The Nasdaq finished yesterday’s session up 1.5 per cent at 26,213.72, taking its gains to 21.4 per cent over the three months through June. The S&P 500 rose along with the Dow, which finished at a second straight record.

“Very often when we have a really good quarter, you see profit-taking on the last day,” said FHN Financial’s Chris Low. “We’re not seeing that today which shows optimism about the third quarter as well.”

Some of that positive sentiment stems from the pullback in oil prices since the United States and Iran agreed on a memorandum of understanding in the Middle East war that has significantly lifted tanker traffic in the Strait of Hormuz.

“If we go into the second half of the year with lower energy prices, that should help restore GDP growth,” Low said.

AI-linked shares had suffered a pullback in recent weeks as investors questioned whether their soaring valuations were excessive. But Tuesday’s session saw a return to the trend that dominated much of the quarter.

Elsewhere yesterday, Europe’s main equity markets closed in the green.

Yen at 40-year lows

After a shaky start, Asian investors pushed tech companies higher yesterday.

Seoul’s Kospi index rose one per cent but was still down from a recent record high touched before a rout last week. The index, which includes chipmakers SK hynix as well as Samsung — soared almost 68 per cent during the quarter.

In Tokyo, the focus was on the yen amid speculation that Japan’s government could intervene in currency markets to push it higher against the dollar.

The yen has fallen to 40-year lows against the dollar and sank as low as 162.67 per dollar amid expectations the US Federal Reserve would lift interest rates this year.

The moves came ahead of US jobs data tomorrow, with analysts warning that a stronger-than-expected reading could fan bets on a Fed rate hike sooner rather than later.

“If the jobs report comes in strong, it could put upward pressure on yields as investors price in higher odds of a July rate hike,” said eToro analyst Bret Kenwell.

An increase in borrowing costs to a 31-year high by the Bank of Japan this month did little to support the yen, with government officials’ warnings of an intervention also falling short.

Finance Minister Satsuki Katayama was reported by local media as saying Tuesday that Tokyo “will take appropriate action at any time as necessary.”

“A major catalyst behind the dollar’s move has been the arrival of new Federal Reserve chair Kevin Warsh, whose public comments have been interpreted as notably more hawkish” than US President Donald Trump might have wished, said Axel Rudolph, an analyst at IG.

“Warsh has repeatedly stressed the importance of maintaining the Fed’s inflation-fighting credibility and has signalled a willingness to keep policy restrictive if price pressures prove persistent,” he said.

Rudolph added that “the prospect of higher US interest rates has widened the expected policy gap between the United States and many of its major trading partners, increasing demand for dollar-denominated assets.”

The prospect of higher US interest rates also constitutes a potential headwind to US equities in the second half of the year.

Key figures around 2020 GMT 

New York — Dow: UP 0.3 per cent at 52,319.20 (close) 

New York — S&P 500: UP 0.8 per cent at 7,499.36 (close)

New York — Nasdaq Composite: UP 1.5 per cent at 26,213.72 (close)

London — FTSE 100: UP 0.1 per cent at 10,497.12 (close)

Paris — CAC 40: UP 0.4 per cent at 8,403.99 (close)

Frankfurt — DAX: UP 1.5 per cent at 24,995.81 (close)

Tokyo — Nikkei 225: UP 0.9 per cent at 70,062.32 (close)

Hong Kong — Hang Seng Index: DOWN 0.6 per cent at 22,881.02 (close)

Shanghai — Composite: UP 0.5 per cent at 4,094.40 (close)

Dollar/yen: UP at 162.59 yen from 161.92 yen on Monday

Euro/dollar: DOWN at US$1.1418 from US$1.1422

Pound/dollar: DOWN at US$1.3256 from US$1.3258

Euro/pound: DOWN at 86.13 pence from 86.16 pence

Brent North Sea Crude: DOWN 0.3 per cent at US$72.92 a barrel

West Texas Intermediate: DOWN 1.8 per cent at US$69.50 a barrel — AFP