Mixed trend in Europe; Wall Street futures are green

13:05

European stock markets are currently trading in a mixed trend. The Dax index rises by about 0.6%, the Potsi weakens by about 0.4% and the KAC adds to its value by about 0.7%. At the same time, the futures contracts on Wall Street are green and indicate increases of up to 0.7% at the opening of trading.

Oil prices are now down by up to 2%. Brent crude traded around $92 per barrel, while US crude oil (WTI) fell below the $90 per barrel mark.

9:40

Asia

In Asia, trading is going on this morning with rising rates. The Tokyo Stock Exchange rose by about 1.9%, the Hong Kong Stock Exchange rose by about 0.2%, the Shanghai Stock Exchange climbed by about 1.1%, and the Seoul Stock Exchange jumped by about 8.2%, led by chip stocks Samsung and SK Hynix which jumped by about 9% and about 12%, respectively. This, as mentioned, against the background of the recovery in the chip sector in the USA.

At the same time, the futures contracts on Wall Street are registering increases of up to 0.6% this morning. In the background, US President Donald Trump referred to the war against Iran during the night and noted that “We are negotiating now, and they want to reach a very good agreement. They are ready to give us everything, they are ready for them not to have nuclear weapons… In the next two weeks we will declare total victory. It will be a total victory, it will happen very soon, and oil prices will drop.”

Wall Street

On Wall Street, after the sharp declines recorded last Friday, the first trading day of the week closed with a mixed trend, with a recovery recorded mainly in the chips sector. The Nasdaq index advanced by about 0.9%, the S&P 500 added to its value by about 0.3% and the Dow Jones weakened by about 0.2%.

While the S&P 500 has recorded some recovery, below the surface it is evident that market breadth – the proportion of stocks participating in gains – remains low. According to FactSet data, towards the end of the trading day, 306 stocks out of the S&P 500 traded in the red – that is, over 60% of the stocks included in the flagship index fell. In fact, while the technology sector led the gains and strengthened by about 1.5%, eight of the 11 sectors of the S&P 500 ended the day in the red.

The Philadelphia chip index (SOXX) jumped by a sharp rate of about 5.7%, after falling by more than 10% on Friday and registering its weakest day in six years. Among the stocks that have climbed can be named Micron , Nvidia , Broadcom andMarvel along with many others.

stock Intel jumped sharply, following a report on the website De Information according to which a number of chip companies, including Google andNvidia turn to the company as their second production plant, in view of the difficulty of TSMC Taiwanese to produce enough production lines for the growing demand for AI chips.

Chip company stock Cerberus which launched last month for one of the largest initial public offerings (IPOs) on Wall Street in recent years, jumped nearly 20%, after receiving a wave of buy recommendations from a number of major investment banks, including Barclays, Citibank, Morgan Stanley, UBS and more (see expansion under section 5).

In the Israeli sector on Wall Street, the Internet company Wix (Wix) revised down its revenue growth forecast for this year, but left its free cash flow forecast unchanged (excluding costs related to acquisitions and reorganization in the company). Following the report, the stock fell in Wall Street trading to a low of more than nine years. As I recall, the company recently updated about the layoffs of 20% of its employees, about a thousand people, and explained this by the strengthening of the shekel against the dollar and the developments in AI that require it to become a fast and lean company.

Overnight, OpenAI announced that it had filed a confidential prospectus with the US Securities and Exchange Commission (SEC), in a first step towards a possible Wall Street IPO. This is a move that places the maker of ChatGPT alongside Anthropic, which also submitted a confidential prospectus last week, while Elon Musk’s SpaceX is already at a more advanced stage after it published a public prospectus in preparation for an offering, according to a value of about 1.8 trillion dollars – and is expected to start trading this Friday. According to estimates, OpenAI is currently worth more than 850 billion dollars, after a fundraising round carried out earlier this year. At the same time, the company also plans to make a secondary tender offer that will allow employees to sell shares according to the current value, thus providing liquidity to the shareholders without waiting for the issuance.

US debt market

In the American debt market, government bond yields climbed, mainly in the longer term of the curve. This morning, the yields also show slight increases, with the ten-year yield standing at 4.56%, while the 30-year yield stands at 5.03%. The trend comes against the background of tensions in the Middle East, as well as the weak expectations for interest rate cuts in the US in the near term.

Macro

With the opening of trade week and the short-term escalation in the Middle East, Dr. Ilan Gildin, manager of a hedge fund at Kerni Family Office and the former economist of the Securities Authority, says that “regional geopolitical escalation is becoming a routine event”, and that the situation is “extremely delicate and subject to spontaneous flare-ups”.

According to him, the current flare-up has found the markets at a sensitive point. Referring to the strong employment data in the US, Gildin says that they “put the chairman of the Fed, Kevin Warsh, between the hammer – a contrary Board of Governors, and the anvil – the White House unwilling to hear about interest rate increases”. Gildin also added that “the combination of a strong economy together with an immediate jump in energy prices due to the war produces double inflationary pressure.”

Recall that tomorrow (Wed), the consumer price index for the month of May is expected to be published in the US, which is expected to have an important impact on the Federal Reserve’s interest rate decision next Wednesday. After the index showed an annual increase of 3.8% in April, economists expect the index to climb by about 4.2% in May. If the May index shows a larger increase than expected, this may strengthen expectations for higher interest levels for a longer time.

In the weekly review of the Psagot Investment House, the economists referred to the division among the members of the Federal Reserve, which is the most significant in several decades. The latest interest rate decision was made when there were four dissenters out of the 12 voting members – the most since October 1992.

“Among the 12 members of the committee today, there are three who are clear hawks (Logan, Kashkari and Hamek) who already voted in April to give up the bias to lower interest rates. Hamek even emphasized recently that if the current trends continue ‘it may be right to act soon,'” they wrote in the summits. “On the other hand, there are also three members who are clear Ionians (Bowman, Paulson Williams). The remaining six members can be classified as “swingers” and the Fed’s policy depends on them in the coming months. Of these, three (Cook, Jefferson and Waller) stated that they would support an increase if inflation does not decrease in the near future. All of this leaves us with the understanding that as long as inflation does not moderate, it is enough that only one of the remaining three (Warsh, Powell or Barr) will side with the hawks, the hawks will already have a majority of seven votes and the decision to raise interest rates will go ahead.”

“What can prevent this? Obviously the first possibility is an agreement between the US and Iran that will lead to a drop in oil prices,” added the summits. “Another possibility is that Warsaw will succeed in the upcoming meeting in justifying his election as chairman and convince the group of swingers to wait with the decision. If he succeeds in doing this until after the midterm elections, Trump will of course be very satisfied.”