S&P 500 Hits Record as SpaceX Slides on AI Spending

Summary

The S&P 500 reached another record high after strong gains in semiconductor shares, although SpaceX fell sharply after investors reacted to its heavy AI infrastructure spending and cash burn. The FTSE 100 was supported by positive sentiment ahead of earnings from major European companies, while South Korea's chipmakers rallied on renewed optimism for AI demand. The US dollar remained under pressure, oil extended its decline as hopes for progress in US-Iran talks improved the supply outlook, and expectations for a September Federal Reserve rate increase eased.

Equities

The FTSE 100 closed 0.2% higher on Tuesday at 10,879.38, rebounding after three consecutive sessions of losses. The FTSE 250 climbed 0.97% to a record high of 24,459.30, supported by strong gains in industrial and construction stocks as investor sentiment improved following upbeat corporate earnings in both the UK and US.

Antofagasta closed 6.85% higher on Tuesday and Anglo American gained 5.45% as copper prices reached their highest level in two months. Fresnillo rose 5.2% after reporting stronger first-half revenue, while Travis Perkins jumped 18.4% after delivering higher first-half profits, helped by price increases and cost-cutting measures.

Energy stocks came under pressure as Brent crude fell sharply on hopes that diplomatic progress between the US and Iran could lead to the reopening of the Strait of Hormuz. BP closed 4.91% lower despite reporting that second-quarter profit more than doubled to $5.73 billion, comfortably ahead of analysts' expectations, while Shell fell 2.47%. HSBC slipped 0.8% after raising its full-year net interest income target, having earlier reached a record high during the session. Smith+Nephew was the weakest performer in the FTSE 100, falling 6.3% after lowering its revenue growth forecast, while Segro edged 0.8% higher after accepting a takeover offer from Prologis valued at up to £14.3 billion.

Wall Street also finished strongly on Tuesday, with the Dow Jones Industrial Average rising 1.71%, the S&P 500 gaining 1.79% and the Nasdaq Composite climbing 2.59%, as all three indices closed at record highs. Optimism followed encouraging company forecasts, with more than 80% of S&P 500 companies now beating analysts' earnings expectations this reporting season.

Caterpillar closed higher on Tuesday after raising its annual revenue growth forecast, supported by continued demand from AI data centre construction. Palantir Technologies also surged after increasing its full-year revenue guidance. After the closing bell, SpaceX shares fell about 7% despite reporting a 92% increase in quarterly revenue, as investors reacted cautiously to its first earnings report since becoming a public company.

Forex & Commodities

The US dollar remained under pressure early on Wednesday, holding close to a six-week low as optimism over easing tensions between the US and Iran reduced demand for the currency. The Japanese yen traded at 157.6 per US dollar after giving back some of Monday’s gains from 155.2, but remained well above its recent 40-year low near 164 following coordinated intervention by Japan and the US. The euro was little changed at 1.153, while the British pound held steady at 1.345. The New Zealand dollar weakened to 0.5870 after data showed the country's unemployment rate rose to a decade high of 5.6% in the second quarter, while the Australian dollar traded around 0.7046.

Gold rose for a third consecutive session early on Wednesday, with spot prices climbing to $4,134 per ounce, the highest level in two weeks. The weaker US dollar and lower oil prices provided support, while investors looked ahead to US employment data later this week for further clues on interest rate expectations. Silver advanced to $60.70 per ounce, platinum reached $1,751 after touching its highest level since mid-June, and palladium rose to $1,360.

Oil prices remained under pressure after Tuesday’s sharp sell-off, with Brent crude trading around $79.36 per barrel and WTI at $75.77 after both benchmarks closed more than 5% lower. Hopes of progress in US-Iran talks and efforts to reopen the Strait of Hormuz continued to reduce geopolitical risk premiums, although shipping through the key waterway remained heavily disrupted. Goldman Sachs expects Brent crude to trade between $80.00 and $90.00 until there is greater clarity on negotiations or a further escalation in the conflict.