Global markets traded with mixed sentiment as investors balanced renewed inflation concerns against relentless momentum in artificial intelligence-related equities. Stronger-than-expected US Producer Price Index (PPI) data reinforced expectations that inflationary pressures remain elevated, while geopolitical tensions in the Middle East continued to dominate commodity markets.
US PPI rose sharply, with annual producer inflation accelerating to 6%, well above expectations of 4.8%, while monthly PPI climbed 1.4% against forecasts of 0.5%. The hotter inflation data strengthened the US dollar and pushed Treasury yields higher, as traders reduced expectations for near-term Federal Reserve rate cuts.
Despite the inflation shock, technology shares continued their rally, driven by optimism surrounding artificial intelligence demand. Nasdaq 100 futures advanced 0.7%, while semiconductor stocks extended gains after Nvidia co-founder Jensen Huang joined President Donald Trump during his Beijing visit. Markets are increasingly hopeful that discussions between Trump and Chinese President Xi Jinping could result in additional trade agreements, particularly in the semiconductor sector.
Asian equities outperformed, with South Korea’s Kospi surging to a record high as investors poured into AI-linked chipmakers. A regional semiconductor index also hit fresh highs following another record close in the Philadelphia Semiconductor Index. Chinese technology shares strengthened further, highlighting continued confidence in the long-term AI growth story.
Meanwhile, oil markets remained highly volatile as geopolitical risks intensified. Brent crude fluctuated near $108 per barrel after rising more than 8% across the previous three sessions. The continued closure of the Strait of Hormuz and President Trump’s rejection of Iran’s latest peace proposal fueled concerns about global energy supply disruptions. The International Energy Agency warned that global oil inventories are shrinking at a record pace and are likely to continue declining in the coming months.
European markets posted modest gains, supported by mining and commodity-related stocks. However, UK assets remained under pressure amid growing political uncertainty. Reports suggesting Health Minister Wes Streeting could resign from Keir Starmer’s cabinet added to speculation surrounding the stability of the current government. At the same time, the UK government announced plans to revise banking ring-fencing regulations in an effort to encourage stronger lending activity.
Currency markets reflected a cautious risk environment, with the US dollar strengthening against major peers as investors sought safety amid elevated geopolitical tensions. Gold edged lower despite ongoing conflict concerns, as rising bond yields and expectations for higher interest rates reduced demand for non-yielding assets.
Overall, investor sentiment remains heavily driven by the AI boom, which continues to offset concerns surrounding inflation, elevated oil prices, and geopolitical instability. While tensions in the Middle East remain a key risk factor for global markets, traders continue to focus on long-term technology earnings growth and the possibility of easing trade tensions between the US and China.
By Amir Amidian
Senior Market Analyst | Zylostar
