By Amanda Cooper
LONDON, Sept 22 (Reuters) - Global shares rallied on Tuesday, driven by a resurgence of optimism over AI, while the oil price hit two-week lows as supply showed signs of improving in the Middle East.
Investor sentiment got a boost from a senior Iranian official telling Reuters on Tuesday that Tehran can reopen the Strait of Hormuz within seven days if the United States eases military pressure and lifts its blockade on Iranian ports.
At the same time, three sources briefed on the matter
told Reuters Saudi Arabia has restarted operations at its East-West Pipeline and could resume exports from the Red Sea port of Yanbu later on Tuesday.
Oil fell as much as 3% before recovering modestly to around $97.6 a barrel.
Stocks were already on a firm footing thanks to the viral popularity of Meta Platforms' Muse AI assistant that launched two weeks ago, which sent the company's stock soaring on Monday and revived enthusiasm for the tech sector after grim warnings from AI chief executives a week earlier.
Semiconductors were among the top gainers in Europe, where the STOXX 600 was up 0.5%, extending the previous day's 1% rally.
Meta shares jumped by more than 11% by the close on Monday in their largest one-day rise since April 2024, helping propel a range of AI-linked stocks, such as AMD, which hit the $1 trillion mark, while Intel and Arm Holdings jumped 12.2% and 17%, respectively.
"This suggests that demand for costly AI tools is robust and worth the hundreds of billions of capex spent by the hyperscalers," said Kathleen Brooks, research director at XTB.
"If there is widespread adoption of Muse, it could add to demand for other AI tools, which could lift the AI sector, after a rough few months."
Nasdaq futures were up 0.1%, suggesting a small rise at the open for the index, which hit record highs on Monday, while S&P futures were also up 0.1%.
TRUMP-XI MEETING AWAITED
Attention is turning to a high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping later this week, with investors watching for any indications that the leaders of the world's two largest economies can prevent a further deterioration in relations.
Xi arrives in Washington on Wednesday for the first time in more than a decade, helping fuel optimism that a trade truce deal between the two countries will be extended and there could be potential cooperation over artificial intelligence.
"For markets, the big question is what’s going to happen when the current one-year trade truce expires in November, and whilst the general tone remains positive, there still isn’t an agreement yet," Deutsche Bank strategist Jim Reid said.
RATE HIKES ON THE WAY
Global bond yields reversed an earlier rise and fell in line with the oil price. That said, investors are pricing in another round of rate hikes from major central banks, which could limit the decline in debt yields.
US 10-year Treasury yields were down 3 basis points on the day to 4.93%, falling further below the 5% threshold, which in turn cut support for the dollar, pushing it below a seven-week high against a basket of currencies struck earlier in the day.
The dollar tilted lower, most notably against the yen, down 0.15% at 157.14, backing off a three-week high.
The Bank of Japan raised rates last week to a 31-year high but two dissenting votes and lack of explicit hawkish guidance disappointed investors, which has left the yen vulnerable and kept traders on alert for signs of official intervention.
"FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen," said Matthew Ryan, head of market strategy at Ebury.
The Federal Reserve, by contrast, raised rates last week and warned its fight against inflation was not over, keeping the door open to further tightening.
(Additional reporting by Ankur Banerjee in Singapore; Editing by Peter Graff and Andrew Cawthorne)
