Meanwhile, oil prices kept pushing higher on stalling peace talks between the US and Iran, a lack of coordination between the US and Israel regarding Israel’s operations in Lebanon and the 6.75-million-barrel fall in US oil inventories last week, according to API data. The barrel of US crude is pushing above the $95pb mark this morning, keeping investors alert to another wave of higher oil prices that could revive inflation worries and trigger a selloff across global bond markets.

US session gains were shouldered by non-tech names on Tuesday, with weakening appetite for Big Technology stocks after Google dropped 3.80%; investors didn’t appreciate the company’s $80bn funding plans to finance additional AI spending.

Other Big Tech stocks traded mixed, as rotation out of software and mega-cap AI spenders and into AI hardware names continued. The biggest market mover yesterday was the 32% jump in Marvell Technology – not on earnings, not after announcing a new technology, but after Nvidia CEO Jensen Huang said that it could be the ‘next trillion-dollar’ company. It took investors just one sentence to send Marvell up by 32%. Elsewhere, HPE spiked 20% after giving a sales outlook that exceeded analyst estimates.

It will be interesting to see whether the AI hardware rally can keep the momentum going if Big Tech falls out of favour and yields push higher again.

Eyes turn to data

On the data front, yesterday’s figures showed that US job openings increased in April, but the surge came alongside weaker hiring and lower quits, suggesting employers are posting jobs more readily than they are filling them.

Later today, the US will announce the latest ADP report and a set of S&P and ISM PMI figures. Strong data may not necessarily fuel risk appetite if price pressures rise alongside the headline numbers.

In Europe, the latest inflation data looked anything but soothing. Euro area inflation surpassed the 3% mark in May for the first time in more than 2.5 years, core inflation rose more than expected to 2.5%, and services inflation jumped to 3.5% as the old continent continued to grapple with higher energy prices.

If yields didn’t react much, it’s because most of the increase was already priced in: there is little doubt that the European Central Bank (ECB) will raise rates when it meets next week. There could be one, or two more hikes before the year ends.

The Stoxx 600, however, pushed higher thanks to European tech stocks. Shares of STMicroelectronics jumped more than 15% after the company raised its data-centre revenue outlook, while Infineon Technologies and Schneider Electric also rallied strongly. Overall, the European technology sector gained roughly 3.4%.

Equity futures are looking flat on both sides of the Atlantic.

Gold is King – sort of...

A report from the ECB showed that gold has overtaken US Treasuries as the world’s largest reserve asset held by central banks, with a 27% share. This comes as little surprise, as many EM central banks have been replacing their UST holdings with gold to reduce exposure to US debt as US debt looks increasingly unsustainable and US geopolitical relations deteriorate.

But gold’s rising weight has also been boosted by valuation effects. The yellow metal is worth more than 30% more today than it was a year ago. Correcting for valuation effects, the share of US Treasuries remains notably higher – somewhere around 26% – while the share of gold and the euro as reserve assets stands near 16%. That means, there is room for gold to gain more field.

Gold has been under pressure since the end of January, when it peaked at nearly $5600 per ounce, and hasn’t been able to perform during the Middle East war, certainly due to the speculative bubble bursting and preventing the yellow metal from acting as a safe haven over the past three months.

The price of an ounce is now testing the 200-DMA to the downside, with a possible slide below this level. But the major support to the 2024-to-date rally sits at a distant $4115, the major 38.2% retracement that will distinguish between the ongoing positive trend and a medium-term bearish consolidation.

Note that the long-term rising trend stands near $3500 today, meaning that gold remains comfortably in a positive trend even after filtering out the past year’s speculative bubble.

In FX

The US dollar index remains flat, a touch below the 100 mark.

The EURUSD consolidates below its 50-DMA despite the hawkish ECB/Federal Reserve (Fed) divergence, while USDJPY is testing Japanese officials’ nerves near the 160 level. We could see or hear about a direct FX intervention to cool the selling pressure on the yen, but the only thing that could truly reverse the negative tide would be a rate move.

That said, the next Bank of Japan (BoJ) meeting will take place on June 15–16, and no rate hike is expected this month. Investors will still be looking for clues on when the next move could come. Persistent inflation and rising wages support further tightening, while trade uncertainty and economic fragility will keep the BoJ cautious and the JPY under pressure – following a potential, temporary relief.

The Nikkei couldn’t care less. The index is up 1.78% at the time of writing, surfing on strong tech appetite, lower yields compared with their May peak and a softer Japanese yen.