Stocks rise on AI optimism, US rate-cut hopes

AFP | London

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Stock markets struck fresh records yesterday, driven by investor optimism over artificial intelligence and US rate-cut hopes, which overshadowed concerns about a government shutdown dragging on.

Wall Street’s main indices pushed higher, with both the S&P 500 and Nasdaq Composite setting new all-time highs.

While the gains have been incremental, “what counts is that there still isn’t any convincing show of selling force”, said Briefing.com analyst Patrick O’Hare.

In Europe, London’s FTSE 100 set an all-time high, led by banks and mining stocks. In Paris the CAC 40 also rose and was close to its March peak, while the DAX 40 dipped in Frankfurt but nevertheless remains close to its record level.

The rally in tech stocks was given another lift on Friday by an agreement between Japan’s Hitachi and ChatGPT developer OpenAI to work on AI and energy.

Shares in Hitachi jumped more than 10%, with other Japanese tech firms and investment giant SoftBank following suit.

The advance helped push Tokyo’s Nikkei 1.9% higher.

Hong Kong retreated, while Shanghai was closed for a holiday.

A surge in AI investment this year has helped push the valuations of some of the sector’s biggest names to eye-watering levels -- with US chip titan Nvidia topping $4 trillion -- and several stock markets to record highs.

Shares in Nvidia also rose and were close to the all-time high they set on Thursday.

This week has seen extra momentum after South Korean semiconductor giants Samsung and SK hynix said they had struck a preliminary deal with the OpenAI to supply chips and other equipment for its Stargate project.

Positive sentiment has also been supported by data in recent months pointing to a slowdown in the US labour market, which led the Federal Reserve to cut borrowing costs and indicate more easing could come.

Traders brushed off a standoff in Washington that has seen the government partially shut down, leading to the closure of some services and the delay of key jobs figures that would normally have been published on Friday.

While the readings on nonfarm payrolls (NFPs) is a major guide for the Fed when deciding monetary policy, analysts said the shutdown was unlikely to deter the Fed from an expected second rate cut this month.

A Senate vote is expected Friday on a House-passed resolution to keep the government funded at current levels through November 21.

The positive mood on trading floors has also helped bitcoin regain some of its mojo, striking back above $120,000 for the first time since mid-August when it hit a record 124,515.