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Date: 5th August 2026.

Stocks Surge as AI Rebounds and Falling Oil Reshapes the Forex Outlook.
 

Asian stock markets rallied sharply on Wednesday as investors returned to technology and semiconductor shares following a record-breaking session on Wall Street.

The recovery was supported by three developments that had previously weighed heavily on global risk appetite: oil prices continued to decline, government bond yields moved lower, and strong corporate earnings revived confidence in artificial intelligence-related investment.

Japan and South Korea led the advance, while gains in China, Australia, and other regional markets indicated that the improvement in sentiment was not limited to a single country.

For forex traders, however, the most important question is whether falling energy prices and bond yields can continue to weaken inflation expectations and reduce pressure on central banks to raise interest rates.

The S&P 500 gained approximately 1.8% on Tuesday and closed at a fresh record, while the NASDAQ Composite jumped around 2.6%. NVIDIA, Broadcom, and Micron were among the strongest performers as investors returned to semiconductor shares following the recent technology-sector correction.

NVIDIA gained more than 2% after Elon Musk praised the company’s processors and highlighted their potential role in SpaceX’s artificial intelligence and computing plans.

The comments reinforced expectations that spending on AI infrastructure, advanced processors, and data centres will continue to expand.

Nevertheless, the earnings reaction was far from universally positive.

AMD shares fell approximately 8.8% in after-hours trading even though the company reported record quarterly revenue of $11.5 billion, representing an increase of 50% from the previous year. Data centre revenue more than doubled, while AMD forecast third-quarter revenue of approximately $13 billion, plus or minus $300 million.

The sell-off suggests that strong growth alone may no longer be enough for highly valued AI companies. Investors increasingly expect earnings, guidance, and margins to exceed already elevated forecasts.

SpaceX also dropped around 7.5% following its first quarterly report as a publicly traded company. Concerns that heavy AI and infrastructure investment could consume cash flow overshadowed the company’s operational growth.

The next potential volatility event will arrive on Thursday, when up to 912 million shares held by employees and other pre-IPO investors are expected to become eligible for sale.


 

Japan and South Korea Lead the Asian Recovery

The positive momentum quickly spread across North Asia.

Japan’s Nikkei 225 advanced approximately 3.5%, while South Korea’s KOSPI rose more than 4%. SK Hynix gained nearly 7%, Samsung Electronics climbed around 4% and several Japanese semiconductor and electronic-component companies recorded strong gains.

MSCI’s index of Asia-Pacific shares outside Japan rose approximately 2.3%, while Chinese blue-chip stocks added around 1.5%. The Australian S&P/ASX 200 also reached a new record as financial and mining shares supported the index.

The regional rally represents a strong rebound from the recent AI-sector sell-off, but it does not necessarily mean that all concerns have disappeared. Investors are still evaluating whether the enormous amounts being invested in AI infrastructure will generate sufficient long-term returns.

China also faces an additional source of risk. The Trump administration is reportedly preparing restrictions on imports of new Chinese optical transceivers and other data centre components on national security grounds.

Shares of several Chinese optical-equipment manufacturers came under pressure following the reports, partially offsetting the wider semiconductor rally.

The most significant macroeconomic support came from oil.

Brent crude declined towards $79 per barrel, substantially below its July peak of approximately $102. West Texas Intermediate fell towards $75 as investors reacted to signs of progress in negotiations involving the United States, Iran, and Oman.

The proposed arrangement could establish a temporary 60-day system for reopening shipping routes through the Strait of Hormuz. Under the reported plan, inbound vessels would travel through a northern lane near Iran, while outbound vessels would use a southern route through Omani waters.

No final agreement had been officially confirmed at the time of writing. Previous negotiations have also collapsed, meaning traders should remain prepared for renewed geopolitical volatility.

The Strait of Hormuz is one of the world’s most important energy transit routes. Before the conflict, approximately one-fifth of the world’s oil supply passed through the waterway.

A sustained reopening would increase the flow of oil out of the Persian Gulf and reduce the geopolitical risk premium built into crude prices.

For forex traders, lower oil prices can have several important consequences:
 

• Reduced inflation expectations may decrease pressure on the Federal Reserve and other central banks to tighten monetary policy.
• Oil-importing economies and currencies may benefit from lower energy costs.
• Oil-exporting currencies could lose some support if crude prices extend their decline.
• Improved risk appetite may weaken demand for traditional safe-haven currencies.

Lower oil prices have already provided relief to government bond markets.

The US 10-year Treasury yield declined to approximately 4.60%, compared with a recent high of around 4.75%. Markets also reduced the estimated probability of a Federal Reserve rate increase in September to approximately 57%, down from 67%.

This repricing reflects expectations that lower energy prices could limit the inflationary impact of the Middle East conflict.

However, the Fed outlook remains uncertain. Kansas City Fed President Jeff Schmid recently argued that tighter monetary policy may still be necessary to return inflation to the central bank’s 2% target.

The combination of lower yields and improving equity sentiment placed modest pressure on the US Dollar.

EUR/USD traded close to $1.1540, near its highest level in approximately six weeks. USD/JPY slipped towards 157.60, although intervention risk remains elevated following last week’s rare coordinated Yen-buying operation by Japan and the United States.

Comments from US Treasury Secretary Scott Bessent were also interpreted as support for further monetary tightening from the Bank of Japan. Expectations of higher Japanese interest rates could provide additional support for the Yen, particularly if Japanese authorities remain willing to intervene.

The New Zealand Dollar underperformed after unemployment rose to 5.6% in the June quarter, its highest level in approximately a decade. The data may strengthen expectations that the Reserve Bank of New Zealand will adopt a more cautious monetary policy stance.

Gold gained approximately 1.6% and traded around $4,140 per ounce.

Ordinarily, a strong equity rally might reduce demand for defensive assets such as gold. However, the decline in Treasury yields supported the precious metal because gold does not offer interest payments and therefore tends to become relatively more attractive when bond yields fall.

A softer US Dollar also made gold less expensive for investors using other currencies.

Gold traders must now balance two competing forces. Further diplomatic progress in the Middle East could reduce safe-haven demand, but declining yields and lower expectations of additional Fed tightening could continue to support prices.


 

Attention now turns towards major US economic data that could determine whether the decline in Treasury yields and the US Dollar continues.

The July ADP private-employment report is scheduled for 12:15 GMT on Wednesday, followed by the ISM Services PMI at 14:00 GMT.

Traders should pay particular attention to the employment and prices components of the ISM report, as these may influence expectations for inflation and Federal Reserve monetary policy.

The more influential July nonfarm payrolls report will be released on Friday, 7 August, at 12:30 GMT.

A stronger-than-expected labour report could revive rate-hike expectations, push Treasury yields higher, and support the US Dollar.

A weaker report could reinforce the recent decline in yields, weigh on the Dollar and provide further support to gold and equity markets.

The Asian stock market rally rests on three improving conditions: continued AI investment, falling oil prices, and lower bond yields.

For the moment, these factors are supporting equities and reducing demand for the US Dollar. However, the outlook remains vulnerable to sudden reversals.

A breakdown in the Hormuz negotiations could send oil prices sharply higher again. Strong US employment or services data could revive expectations of further Fed tightening. Meanwhile, disappointing earnings or rising financing costs could renew concerns about the profitability of AI investment.

Forex traders should therefore monitor oil, Treasury yields, and technology shares together. Their interaction is currently shaping movements across USD/JPY, EUR/USD, commodity currencies, and gold more than any single market in isolation.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

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Andria Pichidi
HFMarkets

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