Trading Day: AI beats Iran impasse

• Record highs achieved across multiple indices including S&P 500, Nasdaq, Nikkei, KOSPI, and MSCI indices, with China stocks at an 11-year high
• Big tech firms like Alphabet and Amazon are issuing bonds in low-yield currencies (Japanese yen, Swiss francs) to fund AI buildout as cash reserves dwindle and capex pressure mounts
• A U.S.-China summit featuring Presidents Trump and Xi is scheduled this week, with Trump accompanied by executives from Tesla, Apple, BlackRock and other major corporations

Market Summary: AI Momentum Drives Stocks to Records Despite Iran Tensions

Key Market Developments

U.S. and global equity markets reached new highs on Monday, May 11, driven by artificial intelligence enthusiasm that overshadowed ongoing Iran ceasefire concerns. The S&P 500, Nasdaq, Nikkei, KOSPI, and MSCI All Country indices all hit record levels, while Chinese markets touched an 11-year high.

Market Performance

Equities: Broad-based rally across global markets despite rising oil prices and bond yields.

Commodities: Significant gains with oil up 3% and another commodity rising 7%, reflecting Middle East supply concerns.

Fixed Income: U.S. Treasury yields increased 6 basis points at the short end, creating a bear steepening curve. A 3-year auction drew weak demand.

Currency: The dollar strengthened marginally, with the yen posting the largest decline among G10 currencies.

Corporate Activity

Major tech companies are ramping up debt issuance to fund AI infrastructure. Alphabet announced plans for its first yen-denominated bond sale, while Amazon is preparing a Swiss franc debut offering. Both currencies offer low-yield borrowing options, with Swiss policy rates at zero. However, this signals dwindling cash reserves among mega-cap tech firms and mounting pressure for AI investments to deliver returns.

Geopolitical Focus

A U.S.-China summit between Presidents Trump and Xi Jinping is scheduled this week, with Trump bringing executives from Tesla, Apple, and BlackRock. China's April economic data showed strong export growth and widening trade surplus, though retail sales disappointed and unemployment increased.

Market Outlook

BlackRock analysts maintain a bullish stance, seeing no fundamental disconnect between record equity prices and elevated commodity prices and yields, viewing the situation as markets pricing both AI-driven growth and Middle East supply shocks simultaneously.