(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Mike Dolan
June 25 (Reuters) -
What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
Micron Technology's impressive earnings update and demand
forecasts on Wednesday have reheated the shaky chip sector,
lifting the trillion-dollar memory chip maker's stock about 14%
overnight and igniting a tech rally around the world on
Thursday.
With Qualcomm also revealing the extent of demand for its chips
over the next couple of years, any suggestion that this week's
market wobble was down to an easing of the chip frenzy appears
wide of the mark.
I'll get into that and more below.
But first, check out my latest column on why peace in the Gulf
is unlikely to help the Federal Reserve's inflation dilemma -
and could even exacerbate it.
And listen to the latest episode of the Morning Bid daily
podcast. Subscribe to hear Reuters journalists discuss the
biggest news in markets and finance seven days a week.
MICRONECONOMICS
With Wall Street futures back higher after the main indexes
ended in the red for a second day on Wednesday, the readout for
other chip-heavy global indexes from the Micron news was
immediate. South Korea's KOSPI, whose most valuable firm SK
Hynix filed for a U.S. stock offering of some $29 billion on
Wednesday, jumped more than 5% on Thursday.
The other big milestone of the day was the return of global
crude oil prices to levels seen just before the Iran war started
in late February, with Brent crude now trading at under $73 per
barrel. Energy prices' completion of this dramatic four-month
round trip came amid more reports of rising shipping traffic in
the Strait of Hormuz since the announcement of the U.S.-Iran
interim agreement.
While that, and some poor U.S. housing data, weighed on
long-dated Treasury yields, it did little to defuse Federal
Reserve rate-hike expectations. Two-year Treasury yields did
slip but remain some 75 basis points higher than they were just
before the Iran war.
That's partly because core U.S. inflation was a problem even
before the war started. We'll get an update on that later today
with the release of the May U.S. PCE report. It's expected to
show that core annual inflation ticked higher to 3.4% last
month.
The Fed's wariness is also partly connected to expectations
that the AI spending surge, soaring stocks and rising chip
prices could be amplifying inflation more broadly, an issue that
could - perhaps ironically - be worsened if the fuel price
retreat takes the brakes off economic activity and spending
elsewhere in the economy.
Chart of the day
Micron forecast quarterly profit and revenue well above
expectations and said its customers had committed $22 billion to
lock in supplies of memory chips, sending its shares surging in
after-hours trading.
Micron's stock, which now values the company at up to $1.3
trillion, has nearly quadrupled this year, and most of that rise
has happened since April even as the Iran war and energy shock
was unfolding.
Today's events to watch
* U.S. May PCE inflation data (8:30 a.m. EDT), May durable
goods (8:30 a.m. EDT), weekly jobless claims (8:30 a.m. EDT)
* U.S. 7-year note auction (1 p.m. EDT)
* Fed's Michelle Bowman, New York Fed's John Williams and
Chicago Fed's Austan Goolsbee all speak
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