New York/London – On Monday, U.S. stocks surged, with Tesla leading the charge, as mega-cap technology stocks experienced a rally while investors eagerly anticipated the forthcoming U.S. inflation report.
Wall Street’s benchmark, the S&P 500, concluded the day 0.7% higher, and the tech-focused Nasdaq Composite saw a gain of 1.1%.
Tesla, the electric-car manufacturer, saw its shares climb by a remarkable 10.1% following bullish remarks from Morgan Stanley analysts, who suggested that Tesla’s supercomputer, Dojo, could open new markets for the company and potentially add $500 billion in value. Tesla shares have already doubled in value this year, with investors increasingly turning to major U.S. technology firms amid growing enthusiasm for artificial intelligence and concerns about global economic growth.
On Monday, other heavyweight technology companies also saw gains, with all of the Magnificent Seven stocks, except for Nvidia, in the green.
Aaron Dunn, co-head of value equity at Eaton Vance Equity, noted, “The picture underneath tech has been very mixed. It’s hard to over-emphasize how much those seven stocks have really impacted market returns this year.”
Year-to-date, the S&P 500 has risen by over 16%, while its information technology sector has surged by an impressive 41% during the same period.
Simultaneously, market participants anxiously awaited the release of the U.S. Consumer Price Index (CPI) data scheduled for Wednesday. The CPI report is closely watched for its potential impact on interest rate expectations for the remainder of the year.
While the Federal Reserve is widely anticipated to maintain its current monetary policy at the upcoming September meeting, concerns are mounting over the possibility of higher oil prices making inflation more challenging to control. This situation could lead to interest rates remaining elevated for an extended period or potentially even being raised further.
Chris Jeffery, head of rates and inflation strategy at LGIM, commented, “We have seen pretty large increases in WTI or Brent in August relative to August of the previous year, so we are going to see a bounce in inflation everywhere, attributable to that energy effect.”
Brent crude closed nearly flat at $90.64 a barrel on Monday, hovering near its highest level of the year, which it reached last week after OPEC+ producers Russia and Saudi Arabia announced additional supply cuts. In contrast, U.S. equivalent West Texas Intermediate slipped by 0.3% to $87.29 a barrel.
European natural gas futures experienced a significant 5.5% jump in Amsterdam due to ongoing strikes at a liquefied natural gas production site in Australia, potentially posing a threat to global supplies.
In Europe, the Stoxx 600 index rose by 0.3%, propelled by gains in the basic materials sector, bolstered by positive economic data from China over the weekend. France’s Cac 40 added 0.5%, while Germany’s Dax advanced by 0.4%.
European investors prepared for a busy week of economic data releases and an interest rate decision from the European Central Bank (ECB) scheduled for Thursday. Although the majority of market participants still expect the ECB to maintain its policy unchanged in September, firmer energy prices and hawkish remarks from policymakers last week have increased the likelihood of a rate increase to 40%.
“We think the [ECB] are capable of looking through the impact of energy prices this month,” said Jeffery. “There are plenty of signs that the policy tightening so far is having traction and is taking the pace of European growth down.”
In China, the benchmark CSI 300 index rose by 0.7% after Saturday’s inflation data indicated a 0.1% increase in consumer prices in August, following deflationary figures in July. However, Hong Kong’s Hang Seng index declined by 0.6%, driven lower by significant drops in property stocks due to a 50% shrinkage in new home sales in China’s major cities during the first week of September.
The Hang Seng Properties index, which tracks Hong Kong’s leading developers, saw a substantial 3.3% decline, while the mainland properties index dipped by 1.8%.
The downturn in China’s property sector, typically responsible for more than a quarter of the country’s economic activity, prompted authorities to ease mortgage downpayment requirements earlier this month. These recent stimulus measures followed government policies aimed at reviving the country’s property sector, stock market, and consumer confidence, all of which struggled to recover following three years of severe pandemic-related restrictions.
China’s renminbi appreciated by 0.8% on Monday, rebounding from a 16-month low, as the central bank intervened to support the currency, establishing a stronger-than-expected trading fix.
The yen also strengthened by almost 0.9%, trading at ¥146.51 against the dollar on Monday, after Bank of Japan Governor Kazuo Ueda raised the possibility of ending the period of negative interest rates by the end of the year.
