* Oil climbs as U.S. and Iran trade attacks in the Gulf
* Stoxx and S&P 500 futures slip, KOSPI extends retreat
* Dollar rises versus yen, flat against the euro
* Fed chair to testify this week, US CPI in focus
(Recasts lede, adds comments)
July 13 (Reuters) – Global stocks fell and government bond
yields rose on Monday as investors grappled with concerns over a
fresh escalation in the Middle East conflict and valuations in
AI-related stocks.
U.S. and Iranian forces renewed exchanges of heavy missile and
drone assaults, with Tehran saying it had again closed the vital
Strait of Hormuz.
The dollar rose with bond yields as investors increased the odds
of a hike in interest rates from the Federal Reserve and other
central banks, just a day before Chair Kevin Warsh is due to
face Congress for the first time in his new role.
Brent crude climbed 3.8% to $78.86 a barrel, up from
the recent trough of $70.14, while U.S. crude added 4.11%
to $74.36 a barrel.
U.S. officials said about 20 vessels had been escorted through
the strait in the previous 24 hours, though ship tracking sites
showed little traffic moving.
“Short term, we still remain optimistic that we could have a
fudge or a patch that would enable oil to flow through and put a
lid on oil prices. (U.S. President Donald) Trump is constrained
due to mid-term elections and the prospects of losing the
Senate, as well as the House,” said Mohit Kumar, an economist at
Jefferies.
“He (Trump) would be much more amenable to some version of a
deal before mid-terms to keep oil prices in check,” he added.
US INFLATION DUE ON TUESDAY
Inflation figures for June on Tuesday could show some cooling in
the headline rate of 4.2% as gasoline prices decline, though
some of that will reverse now that oil is rising anew.
MSCI’s main world stocks index fell 0.38%.
Europe’s STOXX 600 .STOXX was down 0.12%, with tech stocks
falling 1.1%.
Nasdaq futures dropped 1.20% and S&P 500 futures
were down 0.40%. Japan’s Nikkei fell 1.9%.
South Korea’s formerly red-hot KOSPI sank 7.6%,
having already lost almost 8% last week, as leveraged bets on
semiconductor shares came under pressure. The market has emerged
as a key global barometer for chip-sector sentiment and further
losses could ripple out more broadly.
South Korean chipmaker SK Hynix’s U.S.-listed
shares jumped almost 14% in their Nasdaq debut on Friday.
Chip giant Taiwan Semiconductor Manufacturing Co.
reports results on Thursday and another record profit is
expected.
“All eyes on the AI capex trajectory: rising concerns around the
sustainability of the AI capex boom appear to have been the main
catalyst for the momentum wobble,” BofA said, adding that the
bank remained positioned for a continued momentum reversal.
EARNINGS IN FOCUS
For equity investors, a lot is now riding on the coming
earnings season. The major banks kick off from Tuesday, while
Netflix and General Electric are also on the
docket.
“Tech continues to screen highly in our models, supported by
stand out earnings growth/momentum and attractive valuations,”
analysts at Citi wrote in a note.
“While AI volatility may remain elevated over the coming
quarter, we maintain our Overweight stance on global IT and the
U.S.,” they added. “We pair these growth exposures with over
weights in cyclical regions/sectors, including Japan, financials
and materials.”
EURO/DOLLAR HOLDS ITS GROUND
The spike in oil pushed 2-year Treasury yields to
their highest since February 2025 at 4.2393%, while Fed fund
futures implied 39 basis points of policy tightening by the end
of the year.
The dollar index was up 0.05% at 101.13, with the
euro rising 0.05% to $1.1394.
The greenback added 0.24% on the yen to 162.12,
regaining some of the ground lost on Friday when Japanese
Finance Minister Satsuki Katayama floated an idea to encourage
the $1.8 trillion Government Pension Investment Fund (GPIF) and
other retirement vehicles to bring some of their money home.
“The GPIF currently allocates 50/50 between domestic and
offshore and a move back even to the pre-pandemic norm closer to
60/40 would come with a large JPY buying flow,” said Taylor
Nugent, a senior economist at NAB.
“It is worth noting though that while allocations can
theoretically be reviewed any time, they tend to be slow moving,
and the FY26 investment plan is already in place.”
The pound eased 0.14% to $1.3379 ahead of a pivotal
week in British politics as Andy Burnham is expected to be
formally anointed as Labour leader on Friday and named as prime
minister on July 20.
In commodity markets, the rise in yields weighed on
non-interest bearing gold, which slipped 1.5% to about $4,060 an
ounce.
(Reporting by Wayne Cole and Stefano Rebaudo;
Editing by Shri Navaratnam, Kevin Buckland and Helen Popper)
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