Global equities jump 4.8% as AI rebound lifts chipmakers worldwide

The MSCI Asia Pacific Index jumped 4.8% Friday and South Korea's Kospi surged a record 18% after Microsoft and Amazon earnings reignited the AI trade. The Kospi's intraday gain was its largest on record, led by memory giant SK Hynix hitting the 30% daily limit and Samsung Electronics climbing more than 25%.

"The worst of the positioning washout is probably behind us," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. "On valuations, I would say they are more reasonable than a month ago, not cheap. So this is not the end of the AI trade, it is probably the end of its easy phase."

The rebound followed strong earnings and spending plans from Microsoft and Amazon.com Inc., whose shares jumped 12% after its cloud business grew for a fifth straight quarter. Microsoft had surged 16% a day earlier, adding about $450 billion to its market value — the largest single-day gain ever recorded by a stock. Japan's Nikkei 225 gained over 5%, while the MSCI Emerging Markets Index rose 6.5%.

The recovery offers a reprieve after a key gauge of chipmakers fell more than 20% this month on concerns that vast sums poured into artificial intelligence may not pay off. Nasdaq 100 futures climbed 1.2% and Europe's Stoxx 600 headed for a record high, with an exchange-traded fund tracking chip stocks gaining 4% in early US trading.

Apple Slides 6% on Supply Constraints

Apple Inc. tumbled more than 6% in after-hours trading after component shortages weighed on its sales forecast, a sign that industrywide supply constraints are taking a bigger toll than anticipated. Universal Music Group NV's shares plummeted the most since July 2024 after subscription revenue growth fell short of expectations in the second quarter.

Elsewhere, BP Plc said it's starting a process to market its North Sea business for a potential sale as part of a wider portfolio review. NatWest Group Plc raised its full-year guidance and said it will consider buybacks sooner than planned after beating earnings estimates. Credit Agricole SA reported better-than-expected results as its asset management arm posted a record profit.

Rates, FX and Commodities

Treasuries rose across the curve, with the 30-year yield falling three basis points to 5.18% and the 10-year yield declining two basis points to 4.65%. The moves came after the Federal Reserve held rates steady despite still-elevated inflation, keeping scrutiny of the central bank high in the months ahead.

The yen gave back some of Thursday's intervention-driven gains, falling 0.4% to 160.17 per dollar after the Bank of Japan held its policy rate steady. The dollar rose 0.2%, snapping a five-day run of losses. Brent crude fell 1.3% to $87.88 a barrel, while spot gold declined 1.1% to $4,060.11 an ounce.

"While the messaging on inflation has been firm, investors are still trying to assess how that commitment will translate into policy decisions," said Francisco Simon at Santander Asset Management. "The combination of a credible inflation objective, but less visibility on the path of policy decisions, could translate into higher volatility in rates markets."

The AI trade's resilience suggests the derating that erased more than 20% from chip valuations this month may have run its course, though strategists caution that the easy gains are over. With the Bank of England holding rates steady Thursday and the Bank of Japan following suit Friday, the next major test for global equities will be the Fed's policy path and whether AI capital spending continues to translate into earnings growth.

This article is for informational purposes only and does not constitute investment advice.