Big tech stocks lead Wall Street stocks higher

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US stocks rose on Monday as a jump in Tesla shares led a rally in megacap tech stocks, while investors awaited the closely watched US inflation report later this week.

Wall Street’s benchmark S&P 500 finished 0.7 per cent higher on Monday, while the tech-focused Nasdaq Composite gained 1.1 per cent.

Tesla rose 10.1 per cent after Morgan Stanley analysts said the electric-car maker could add $500bn in value as its supercomputer Dojo opened new markets to the company.

Tesla shares have more than doubled this year, as investors turn to large US tech companies amid heightened enthusiasm for artificial intelligence and concerns about global economic growth.

Other heavyweight technology groups also rose on Monday, with all of the Magnificent Seven stocks except Nvidia making gains.

“The picture underneath tech has been very mixed,” said Aaron Dunn, co-head of value equity at Eaton Vance Equity. “It’s hard to over-emphasise how much those seven stocks have really impacted market returns this year.”

The S&P 500 has advanced more than 16 per cent year to date, while its information technology sector has added 41 per cent in the same period.

Line chart of Share price performance (%) showing Tesla stock rises on bullish Morgan Stanley forecast

Meanwhile, traders were waiting for US consumer price index data due on Wednesday, with a view to how this latest inflation report could affect the outlook for interest rates through the end of this year.

The Federal Reserve is widely expected to hold monetary policy steady at its September meeting next week, but there are mounting concerns that higher oil prices could make inflation harder to tame. That could result in interest rates remaining higher for longer, or potentially raised further.

“We have seen pretty large increases in WTI or Brent in August relative to August of the previous year, so we are going to see a bounce in inflation everywhere, attributable to that energy effect,” said Chris Jeffery, head of rates and inflation strategy at LGIM. 

Brent crude settled about flat at $90.64 a barrel on Monday, remaining near the highest level of the year hit last week after Opec+ producers Russia and Saudi Arabia announced more supply cuts. US equivalent West Texas Intermediate fell 0.3 per cent to $87.29 a barrel.

European natural gas futures jumped 5.5 per cent in Amsterdam as strikes continued at a liquefied natural gas production site in Australia, threatening to disrupt global supplies.

Europe’s region-wide Stoxx 600 rose 0.3 per cent, lifted by gains in the basic materials sector, which was boosted by positive economic data from China at the weekend. France’s Cac 40 added 0.5 per cent and Germany’s Dax advanced 0.4 per cent.

Investors in Europe prepared for a busy week of economic data releases and an interest rate decision from the European Central Bank on Thursday.

While the majority of market participants still think the ECB will keep its policy unchanged in September, firmer energy prices and hawkish remarks from policymakers last week lifted the probability of a rate increase to 40 per cent.

“We think the [ECB] are capable of looking through the impact of energy prices this month,” said Jeffery. “There are plenty of signs that the policy tightening so far is having traction, and is taking the pace of European growth down.”

In China, the benchmark CSI 300 index added 0.7 per cent after Saturday’s inflation data showed consumer prices rose 0.1 per cent in August, following July’s deflationary figures.

But Hong Kong’s Hang Seng index slid 0.6 per cent, dragged lower by steep declines in property stocks as new home sales in China’s biggest cities shrank by half in the first week of this month.

The Hang Seng Properties index, a gauge of Hong Kong’s top developers, fell 3.3 per cent, while the mainland properties index was down 1.8 per cent. 

The downturn in China’s property sector, which usually accounts for more than a quarter of the country’s economic activity, prompted authorities to relax requirements for mortgage downpayments this month.

The most recent stimulus measures followed the institution of government policies designed to bolster the country’s property sector, stock market and consumer confidence, all of which struggled to recover after three years of severe coronavirus pandemic restrictions.

China’s renminbi rose 0.8 per cent on Monday, rebounding from a 16-month low, after the central bank stepped in to support the flagging currency, setting a stronger than expected trading fix.

The yen rose almost 0.9 per cent to trade at ¥146.51 against the dollar on Monday, after Bank of Japan governor Kazuo Ueda raised the possibility of ending its period of negative interest rates by the end of the year.


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