Global stocks rally as investors favor tech; oil prices fall

Global stock markets rallied on Tuesday, with investors eagerly buying into technology stocks following a recent dip. The surge was fueled by excitement surrounding upcoming initial public offerings (IPOs), including artificial intelligence firm OpenAI and the highly anticipated market debut of SpaceX later this week. Major tech stocks like Meta and Eli Lilly saw gains in pre-market trading.

In contrast, oil prices fell as reports emerged that Israel and Iran have agreed to a temporary cessation of attacks on each other. This de-escalation of Middle East tensions provided some relief to markets, although maritime traffic through the Strait of Hormuz remains below normal levels, keeping crude prices above $90 a barrel.

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Wall Street bankers and CEOs are beside themselves with excitement about these mega-cap listings. However, on the street there is some caution setting in.

Despite the positive market sentiment, underlying caution persists among investors. Concerns about rising borrowing costs are prominent, with US 10-year Treasury yields above 4.5% and 30-year yields exceeding 5% for more days this year than since 2007. Analysts at Bank of America noted that sticky inflation is prompting global central banks to overshoot targets, leading to repricing in bond markets and challenges for long-duration assets and emerging market currencies.

The prospect of further interest rate hikes by the Federal Reserve to combat inflation is also a key concern. Data on US consumer prices is expected to show continued upward pressure from energy costs. Futures markets indicate a significant chance of a Fed rate increase as early as October, with a December hike largely priced in. The European Central Bank is also expected to raise rates at its upcoming meeting.

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Our Global Breadth Rule shows nearly half of equity markets already overbought, led by Korea, Taiwan and Finland.