European equities advanced on Tuesday, building on Monday's gains, as a global rebound in technology shares continued and oil prices extended their decline on hopes of a resolution to the Iran war. Investors also looked ahead to US inflation data due later in the day.
Shortly after the opening bell, London's FTSE 100 was up 0.73%, Paris's CAC 40 gained 1.20%, and Frankfurt's DAX advanced 1.14%. US futures edged higher, while Brent crude fell more than 2.5% to around $90 a barrel, and West Texas Intermediate slipped to about $84.70.
“It’s quite remarkable to think investors were showing signs of panic less than a week ago, and now markets are merrily pushing higher as if there’s nothing to worry about,” said Russ Mould, investment director at AJ Bell.
Tech rebound spreads across Asia and Europe
The rally was led by technology shares, which had been battered last week after the Democratic sweep of Congress raised regulatory concerns. In Asia, AI-linked firms surged, with Taiwan's Taiex jumping 2.5%, South Korea's Kospi climbing 4.5%, and Japan's Nikkei 225 closing 2.9% higher. SoftBank Group, a major investor in OpenAI, saw its shares leap 13.9% ahead of its earnings release.
Investors remained focused on Nvidia, after reports that the FBI was investigating whether CEO Jensen Huang had been targeted by a foreign intelligence operation. Nvidia's shares traded 1% higher in pre-market trading despite the news. “Certain investors might have taken the view that whatever happens to Jensen Huang, the company will continue to dominate the AI chip space,” Mould said.
Tech giants including Amazon, Microsoft and Apple were among the big gainers on Monday in New York, as bargain-hunting helped the sector bounce back. Confidence in the AI outlook remained solid, with Taiwan Semiconductor Manufacturing Co. reporting October revenue up 59.7% from a year earlier, underscoring robust global demand for AI chips.
However, some analysts cautioned that the rally did not signal a return to market health. “The market rallied because the sellers stepped away, not because the entire buy-side suddenly rediscovered its courage,” wrote Stephen Innes of SPI Asset Management. He noted that for the second consecutive session, companies receiving massive capital expenditure outperformed those writing the cheques, a potentially important development after last week's indiscriminate liquidation.
“The hyperscalers remain central to the AI investment cycle, but the market is increasingly questioning the returns on the extraordinary sums being committed to new infrastructure,” Innes added. “Equipment providers, optical networking companies and selected data-centre suppliers can still benefit from existing spending programmes, even as investors become more selective about the ultimate economics for the companies funding those projects.”
Oil prices fall on Iran peace hopes
Oil prices continued their retreat on hopes of an end to the Iran war. Both main contracts fell more than 2.5% by mid-morning, extending Monday's losses, when Brent dropped almost 6%. Both have lost around 20% this month as traders bet on a resolution to the conflict, which has sent inflation soaring and prompted central banks to raise interest rates.
US President Donald Trump said on Monday there was “positive momentum” towards ending the war after meeting Qatar's prime minister at the White House. He said further strikes were “quite unlikely”, although he kept the option open. “Markets are increasingly taking the view that Donald Trump needs to forge a new path if he wants to save face from the midterm election washout, and that might mean finding a way to end the Iran war,” Mould said.
In currency markets, the dollar rose slightly against the yen, while the euro slipped to $1.1249. In Asia, China's exports in October climbed 35.2% from a year earlier, while imports grew 41.6%, putting the country on track for another record annual trade surplus. Australia's S&P/ASX 200 rose 1.1%, while Indian markets were closed for a holiday.
