Equities: Rally extends on reduced downside fears – Danske Bank

The global equities market experienced a strong session on Wednesday, driven by easing concerns over political risks and the AI bubble, leading to a near 15% year-to-date return. The S&P 500 reached its strongest day since April and a new record high, while Asian markets and futures also showed gains. This risk-on session, unlike a typical one, was primarily fueled by a reduction in downside fears rather than an upgrade in growth expectations.

The primary factors contributing to this shift were decreased concerns over the Iran conflict and diminishing fears surrounding the AI bubble. Despite strong macroeconomic conditions and earnings, the compressed risk premia allowed equities to continue their upward trajectory. Notably, three sectors, including Energy, closed lower, while global Technology sectors surged more than 3%.

The rally pushed global equities to a 15% gain year-to-date. The S&P 500 posted its best session since April and its first record close since June 2. This positive momentum continued in early trading, with gains observed across Asian markets alongside stronger US and European futures. Meanwhile, currency markets saw mixed results; GBP/USD recovered near 1.3550, but UK inflation data did not spur further gains.

EUR/USD continued its upward trend toward 1.1600, while the US Dollar faced downward pressure due to poor economic data, potentially indicating a lack of tightness in Federal Reserve policy. Gold briefly surpassed $4,350, but the US Dollar's stability may support the commodity's price in the short term. Meme coin Shiba Inu showed slight recovery and displayed positive sentiment indicators.