Risk appetite in global markets grew amid the positive outlook on growth driven by technology and artificial intelligence (AI) stocks, while all eyes turned to the upcoming monetary policy decisions by the European Central Bank.
Middle East risks continued to fuel concerns, affecting pricing, while strong second-quarter earnings by US tech leaders indicated AI spending will continue, keeping risk appetite alive.
Alphabet posted strong revenue and profit growth, IBM said it will boost AI and automation investments despite limited revenue growth, while Tesla’s revenue rose on an annual basis but its net profit declined, underscoring the ongoing pressure on its profitability.
These developments fueled optimism over AI and tech, while gains in Asia led by the semiconductor sector contributed to the trend.
Meanwhile, ongoing military activity in the Middle East continued to limit risk appetite.
Concerns persisted over the geopolitical risks spilling over beyond the Strait of Hormuz to other major trade routes due to the US-Iran conflict in the region.
US President Donald Trump said Washington will bomb a bridge or power plant in or near Tehran if Iran were to fire a missile, rocket, drone, or any other weapon at a vessel in the Strait of Hormuz.
He said the US does not need the Strait of Hormuz but they will do anything not to allow Iran to have nuclear weapons.
At the same time, Brent crude rose to its highest since June 11 at $92.4 a barrel amid supply concerns in the energy sector — Brent crude is trading at $92 a barrel on Thursday, up 1.5%.
Concerns that resurging oil prices could fuel inflationary pressures and could also heighten the expectations for Fed rate hikes came to the fore, analysts say.
The Fed’s likelihood to raise its policy rate to 3.75-4% in September rose to 98%, according to money market estimates. Markets also price in a 68% possibility of an additional rate hike in December.
The US two-year Treasury Yield rose to 4.32% on Wednesday, testing its highest since Feb. 14, 2025, before settling at 4.31% on Thursday.
The US 10-Year Treasury yield climbed three basis points to 4.66% on Wednesday and is currently at 4.67% on Thursday, its highest in the past two months.
The US Dollar Index held steady around 101, while gold fell 0.2% to $4,121 per ounce amid Fed rate hike estimates and rising bond yields, despite having traded upward since the start of the week.
Meanwhile, Alphabet’s revenue surged 24% year-on-year in the second quarter to $118.8 billion, while its net income rose by a whopping 298% to $112.1 billion, compared to $28.2 billion in the second quarter of last year. Alphabet’s shares fell around 3% in after-hours trading after it reportedly decided to increase capital spending.
IBM’s revenue rose 1% year-on-year in the April-June period, reaching $17.2 billion, while its net income dropped 1% to $2.17 billion.
IBM CEO Arvind Krishna said the company took steps to boost revenue growth and profitability with AI and automation investments.
Tesla’s net income fell 5% year-on-year to $1.11 billion in the second quarter, while its total revenue rose 26% to $28.2 billion.
The S&P 500 dropped 0.14% and the Nasdaq Composite fell 0.57%, while the Dow Jones Industrial Average traded flat on Wednesday. American indexes opened Thursday in negative territory.
Meanwhile, European stock markets traded positive on Wednesday but all eyes turned to the ECB’s monetary policy decision expected to be announced on Thursday.
ECB President Christine Lagarde’s assessments over the inflation outlook, energy prices, and geopolitical risks will shape the European markets’ direction.
The ECB is expected to maintain rates on Thursday, analysts say.
The broader tech stock recovery boosted risk appetite in the region despite concerns that the Middle East tensions could drive up energy prices again.
The UK’s annual inflation came in at 2.6% in June, below the expected 2.7% rate, while posting its lowest since March 2025.
EU member states approved the UK’s participation in a loan program of €90 billion ($102.8 billion) to meet Ukraine’s urgent defense needs in 2026 and 2027.
The UK's FTSE 100 rose 1.24%, France's CAC 40 climbed 0.89%, Italy's FTSE MIB 30 increased 0.97%, and Germany's DAX 40 jumped 0.58% on Wednesday. European indexes opened Thursday on a negative note.
A buying trend came to the fore in Asia, except for China, while continued expectations that AI spending will increase supported the semiconductor sector of the region.
Japan’s Rohm Ltd. shares rose 3%, Renesas Electronics shares grew 1.5%, and South Korea’s SK Hynix shares jumped 5.2%.
Chinese stock markets saw a selloff due to allegations that Chinese firm Moonshot AI transferred technology from US firm Anthropic’s Fable model.
Near Thursday’s close, Japan’s Nikkei 225 rose 0.6%, South Korea’s Kospi increased 3.7%, and Hong Kong’s Hang Seng climbed 1.3%, while China's Shanghai Composite fell 0.2%.
