Stocks around the world experienced a significant increase on Friday, following reports from Iranian state media indicating that a proposed peace agreement would lead to the reopening of the Strait of Hormuz. In Asia, Japan’s Nikkei 225 experienced a notable increase of 2.8%, while India’s Nifty 50 rose by 1.3%. South Korea’s Kospi saw a significant gain of 4.6%, and the Shanghai Composite climbed by over 1%. European shares experienced a notable increase, with the pan-European Stoxx 600 rising by 1.8%, while the majority of major bourses saw gains of approximately 2% during morning trading. On Wall Street, futures trading indicated a potential for a higher opening. S&P 500 futures increased by approximately 0.45%, whereas Nasdaq 100 futures rose by 0.37%. Futures associated with the Dow Jones Industrial Average increased by 331 points, representing approximately 0.65%.
Iranian state media has indicated that the draft version of the memorandum of understanding between Iran and the U.S. encompasses a U.S. commitment to lift oil sanctions, alongside an Iranian commitment to reopen the Strait of Hormuz. A peace deal may be finalised in Switzerland as early as Sunday, according to a report on Friday, referencing sources knowledgeable about the arrangements. Friday’s rally follows a surge on Thursday, driven by a rebound in chip stocks and indications from President Donald Trump that a peace deal with Iran is on the horizon. Traders are closely monitoring SpaceX, the rocket manufacturer founded by Elon Musk, as it prepares for its debut on the Nasdaq. The company has established a fixed price of $135 per share, which would result in a valuation of $1.77 trillion. The company intends to offer 555.6 million shares, which would result in a $75 billion fundraising effort, marking the largest initial public offering in history. It exceeds Alibaba’s $22 billion offering in 2014 by more than three times, which remains the largest U.S. IPO to date.
If the IPO proceeds as anticipated, it may serve as a significant catalyst for stocks on Friday. However, certain investors express apprehension that the substantial size of the offering may exert pressure on the market. Even if the market can absorb these new shares of SpaceX, initial public offerings are typically characterised by volatility, and Friday’s offering may initiate another shift in technology leadership as investors seek capital to support their new issues. “History indicates that substantial IPO issuance tends to arise during times of robust equity market sentiment; however, the influx of equity supply may lead to some market indigestion.” And “Household equity exposure already sits close to an all-time high, which suggests they may sell existing holdings to fund these new positions,” wrote Douglas Beath. “In light of the persistent geopolitical tensions and the approaching midterm elections, this may serve as an additional factor contributing to increased market volatility in the latter half.”
“We maintain a positive outlook on the AI theme and the Information Technology sector but advise against pursuing this upward trend,” he noted, highlighting that as of May 29, the sector has increased by 37% since April, in contrast to the S&P 500’s 17% rise during the same timeframe. Thursday’s rally propelled the S&P 500 and Nasdaq Composite into positive territory for the week, with the indexes set to increase by 0.14% and 0.39%, respectively. The blue-chip Dow lagged, set to conclude the week with a decline of 0.04%. Investors will be closely monitoring the preliminary reading of the Michigan Sentiment index for June, set to be released on Friday morning.