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June 2, 2026 - 04:56
6 minutes
(Bloomberg) — Equities retreated from all-time highs as progress toward a US-Iran peace deal stalled and investors paused after a rally in artificial intelligence stocks.MSCI’s regional equity index dropped 0.4%, with South Korea — a bellwether for artificial intelligence investments — falling 1.8% as traders locked in gains from the rally. Technology shares remained broadly under pressure, with Nasdaq 100 futures slipping 0.6%. Chinese tech stocks bucked the trend, with a gauge of major firms advancing as Tencent Holdings Ltd. jumped 7.4%.Brent crude traded around $95 a barrel as conflicting signals from the Middle East clouded prospects for a peace deal. Treasuries held Monday’s losses as the impasse in negotiations fueled concerns that higher energy costs will stoke inflation and force the Federal Reserve to keep interest rates higher for longer. The yield on the benchmark 10-year Treasury stood at 4.45%.US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu offered differing accounts of a call about the fighting in Lebanon, as the US struggled to get efforts toward a peace deal with Iran back on track. The conflicting accounts were the latest example of confusing signals on progress to end the war, now in its fourth month.“Asian markets are taking a breather after a blistering AI-led run, with stalled US-Iran peace efforts giving investors a clear excuse to lock in profits near record highs,” said Hebe Chen, an analyst at Vantage Global Prime. “The AI trade is not broken, but after such a stretched rally, it has become acutely sensitive to any headline that could reignite the oil-inflation-yields chain reaction that the market spent three months trying to escape.”Even as the AI-driven rally continues to propel equities to record highs, markets have been whipsawed by geopolitical headlines after an escalation in Middle East hostilities complicated peace talks. While investors still see a path to a US-Iran agreement, fragile conditions in the Strait of Hormuz have kept energy prices in focus as a key driver of the near-term outlook for inflation and rates.What Bloomberg Strategists Say…“Momentum has been king for much of the past year across equities, which means every sudden drop in a major index carries with it the potential to set off a sustained slide. The threat lurks that substantive macro negatives will at some stage take the heat out of AI-fueled rallies.”— Garfield Reynolds, Markets Live team leader. For more on the analysis, click here.Trump has regularly claimed that negotiations were advancing and close to reaching a deal as the ceasefire that began in April remained fragile. Iran disputed reports last week that an interim accord was close and on Monday said it would act with its proxies, dubbed the “Axis of Resistance,” against Israel if fighting in Lebanon continued.“Expectations for a US-Iran agreement remain fluid,” said Jason Pride and Michael Reynolds at Glenmede. “Recent strikes and conflicting statements from both sides highlight that key details remain unresolved.”Elsewhere, the White House said it will reduce tariffs on agricultural equipment, such as combines and harvesters, in order to reduce costs for US farmers and manufacturers.Attention during the US session was firmly on AI spending by companies. The S&P 500 Index notched its eighth straight advance, its longest winning streak since May 2025.Alphabet Inc. unveiled plans to raise $80 billion through equity offerings, including an investment deal with Berkshire Hathaway Inc., highlighting the scale of spending tied to the race to build AI infrastructure.Anthropic PBC pulled ahead of OpenAI with its confidential IPO filing Monday, as the free-spending AI startups battle for a fundraising edge that’s set to determine who will win the ultimate battle for computing power.In late trading, Hewlett Packard Enterprise Co. shares soared 27% after the company gave an outlook for annual sales that topped estimates, citing massive growth in AI-fueled demand for its servers and networking.In Asia, the yen was steady around 159.70 per dollar after Japanese Finance Minister Satsuki Katayama said authorities are ready to take steps as needed in the foreign exchange market. The comments came after the ministry disclosed the monthly intervention data on Friday.Investors are also looking ahead to a fresh round of economic data, culminating in Friday’s May jobs report, for clues on the health of the US economy and the Fed’s policy path under new Chairman Kevin Warsh.“There is a creeping view that US growth could be re-accelerating as AI investment seeps through the broader economy,” Chris Turner, head of foreign-exchange strategy at ING Bank, wrote Monday. “This week’s data should further support the growing narrative that the Fed can be comfortable with its full employment mandate and can focus squarely on the upside risks to inflation.”Some of the main moves in markets:StocksS&P 500 futures fell 0.4% as of 11:50 a.m. Tokyo time Japan’s Topix fell 1.4% Australia’s S&P/ASX 200 fell 0.5% Hong Kong’s Hang Seng rose 1.3% The Shanghai Composite was little changed Euro Stoxx 50 futures rose 0.3% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was unchanged at $1.1631 The Japanese yen was little changed at 159.71 per dollar The offshore yuan was little changed at 6.7607 per dollar The Australian dollar was unchanged at $0.7159 CryptocurrenciesBitcoin fell 1.1% to $70,575.13 Ether fell 0.8% to $1,986.22 BondsThe yield on 10-year Treasuries was little changed at 4.45% Japan’s 10-year yield declined 2.5 basis points to 2.655% Australia’s 10-year yield advanced one basis point to 4.90% CommoditiesWest Texas Intermediate crude fell 0.4% to $91.83 a barrel Spot gold fell 0.2% to $4,475.15 an ounce This story was produced with the assistance of Bloomberg Automation.–With assistance from Toby Alder, Momoka Yokoyama, Sarah Chen and Abhishek Vishnoi.©2026 Bloomberg L.P.
