Morning Note: A Round-up of Global Financial Market News.

Market News

Stocks and bonds dropped as investors faced a trio of headwinds with a pullback in the AI trade, mounting bets on a US interest rate hike, and rising oil prices due to a worsening of the Middle East conflict. Israel said it struck military targets in Iran, retaliating against missile attacks by Tehran, despite Donald Trump’s call for Benjamin Netanyahu to refrain from escalation. Brent Crude rose to $97.50 a barrel.

MSCI’s Asian equity gauge slid 3.2%, with South Korea’s Kospi index dropping 6.4%. A slump in chip firms forced a brief halt in the South Korean benchmark, the world’s best-performing gauge this year on the back of the AI trade. Elsewhere in Asia, Japan’s Nikkei 225 fell by 3.9%, while markets less exposed to the AI theme incurred small losses: Hang Seng (-1.3%); Shanghai Composite (-1.7%). This followed heavy losses in the US on Friday – S&P 500 (-2.6%); Nasdaq (-4.2%). The FTSE 100 is currently down 0.5% at 10,325, while Sterling trades at $1.3335 and €1.1575.

Goldman no longer expects the Federal Reserve to cut interest rates this year after a stronger-than-expected jobs data. The headline print came in well above consensus expectations, with non-farm payrolls for May of 172,000, versus the 88,000 forecast. President Trump said the Fed would be wrong to raise rates, while bond traders are betting this week’s CPI print will bolster the case for a hike. The yield on the US 10-year Treasury climbed to 4.57%. The ECB’s expected increase this week is set to lead a global tightening trend.

Gold has continued its recent slide and currently trades at $4,300 an ounce. China’s PBOC added 320,000 troy ounces of gold to its reserves in May, extending its buying streak to 19 months.

Following last week’s equity fundraise from Google owner Alphabet, Meta Platforms (the owner of Facebook, WhatsApp, and Instagram) is planning  a stock offer to fund its AI investment plans.

In the banking sector, Santander chief Ana Botín said that UK bank taxes make ‘no economic sense’, while in Italy, Intesa offered to buy Monte Paschi in a deal valued at €30.6bn, countering a rival pitch by Banco BPM.

Source: Bloomberg