US futures
Dow futures 0.73%, S&P futures 0.65% & Nasdaq futures 1.1%
In Europe
FTSE 2.1% & DAX 2%
- U.S. stocks are heading towards fresh record highs
- The U.S. and Iran are reportedly close to agreeing on a deal.
- U.S. chip stock earnings lift sentiment
- Oil slumps on hopes of an end to the U.S.-Iran war
US stocks hit new record highs
US stocks are heading to a stronger opening on Wednesday on optimism about a potential US-Iran peace agreement and the AI trade.
The S&P 500 and the Nasdaq hit record highs yesterday and are expected to open at fresh record highs today, helped by impressive earnings from AMD.
The market is increasingly convinced that the war in the Middle East will not re-escalate and disrupt the markets' impressive earnings drive.
The US and Iran are reportedly close to agreeing on a one-page memorandum to end the war, according to a Pakistani mediator source, and also start 30 days of negotiations to open the Strait of Hormuz and limit Iran's nuclear program.
Oil prices have fallen 10%, dropping to a two-week low, calming inflationary worries and bringing Treasury yields lower. This, combined with the weaker US dollar, creates a positive backdrop for further gains.
However, the risk here is that the markets have got it wrong, in which case any signs of a re-escalation could see a reversal in the risk rally.
Corporate movers
AMD is jumping around 20% pre-market after impressive earnings, revenue, and Q2 guidance. AMD is expecting second-quarter revenue of $11.2 billion, well ahead of the $10.52 billion expected. Meanwhile, revenue in Q1 jumped 38%, whilst data center revenue increased 57%.
Supermicrocomputer, the server maker, is up over 13% after posting EPS of 84 cents per share on revenue of $10.24 billion. This was ahead of expected earnings of 62 cents but below revenue expectations of $12.39 billion.
Disney is rising 4% after fiscal Q2 revenue beat forecasts, thanks to a strong performance from the company's streaming and theme park business.
Uber is up over 8% even though Q1 revenues came in below expectations at $13.2 billion, compared to expectations of $13.29 billion. However, guidance for the current quarter was better than expected, and the company beat earnings estimates.
Nasdaq 100 – Technical analysis
The NASDAQ extended its recovery from the 22,800 low, rising above the 200 SMA and the multi-month rising trend line to a record high of 28,500. The RSI is deep in overbought territory, so a period of consolidation or a move lower could be on the cards.
With blue skies above, buyers will look towards 29,000 and 30,000 as the next logical targets.
Minor support is seen at 28,000, then at 27,000, the rising trendline support. A break below here opens the door to 26,000, the 2025 high. Below here, the chart is in more neutral territory.
FX: USD falls, GBP/USD rises.
The US dollar is falling sharply as safe-haven flows unwind amid optimism that the US and Iran will agree on a deal soon. The US dollar has now fallen to pre-war levels on the great progress towards a deal.
EUR/USD is rising on weakness in the US dollar and falling energy prices. Worries over high oil and energy prices had weighed on the euro at the start of the Iran war. These flows are unwinding. Separately, data showed that eurozone economic activity contracted in April, with the PMI falling to 48.8, slightly higher than the preliminary reading of 48.6.
GBP/USD is rising amid a weaker US dollar, despite concerns about the upcoming local elections. While the local elections tomorrow will not change anything in Westminster, they're considered similar to U.S. midterms and provide a gauge of how the governing Labour Party is doing. UK gilt yields rose sharply yesterday, with the 30-year hitting a 28-year high amid fears that Labor would perform badly and that a more left-leaning leader would replace Keir Starmer.
Oil slumps on US-Iran deal hopes.
Oil prices are slumping on Wednesday, dropping to two-week lows on optimism that the U.S. and Iran are nearing a deal to end the war.
Brent futures have fallen 9%, dropping below $100 a barrel for the first time since April 22, whilst WTI is down at $91 a barrel in its biggest daily decline in over a month.
The drop in oil prices has come on reports from a mediator in Pakistan that the US and Iran are closing in on an arrangement to end the war and begin talks on a nuclear deal. This could mean that the Strait of Hormuz would reopen sooner rather than later.
Meanwhile, U.S. crude oil inventories fell for a third week, whilst gasoline and distillate stocks also declined, according to API data. EIA figures are due out later today.
