Bulls run rampant amid a quarter in which oil prices dropped by the largest margin in years, along with gold and the yen

An endless rally in AI stocks continued to keep the momentum going for the quarter, which saw South Korea’s KOSPI rise 68% while Taiwan’s index rose 45%

The world’s stocks on Tuesday were on the verge of experiencing their biggest quarterly percentage gain in six years, whereas Brent oil was on course to experience its biggest quarterly fall since 2020, amid traders’ focus on a shaky ceasefire agreement between the US and Iran.

On the final day of the second quarter, the U.S. dollar was on course to strengthen versus its peer group for a fourth consecutive quarter, as the yen fell to a 40-year low amid a sharp turnaround in expectations for rate hikes by the U.S. The emerging markets currency group strengthened more than 1% versus the dollar during the quarter.

In the energy sector, however, the Strait of Hormuz is slowly reopening as tensions between the U.S. and Iran have cooled to an uneasy truce, taking the cost of a barrel of Brent crude down by nearly 40% this quarter.

The rise of what seemed to be an unstoppable growth wave in shares of AI companies kept the equity rally alive this quarter, with South Korea’s KOSPI soaring 68% and Taiwan’s market index climbing 45%. The Nasdaq Composite rose more than 20%. The MSCI All World index is now up 14% and has hit a new high earlier this month, its strongest quarterly performance since 2020. Emerging market equities are 23% higher this quarter.

Even though the Europe-based STOXX 600 index has significantly fewer companies that would benefit from AI than most Asian and U.S.-based indices, it was still able to gain almost 10% during the quarter, rising each month since March.

“There seems to be no sign yet of when this bull run will come to an end,” said David Morrison, market analyst at Trade Nation. “Whenever there is a dip in the market, we find ourselves in a situation where we have another reason to buy.”

The Dow Jones Industrial Average gained 126.78 points, or 0.25%, to close at 52,309.52, while the S&P 500 gained 28.81 points, or 0.39%, to close at 7,469.63, and the Nasdaq Composite gained 207.36 points, or 0.81%, to close at 26,029.22.

The world stock index by MSCI climbed by 5.31 points, or 0.48%, to reach 1,117.36. The pan-European STOXX 600 index climbed by 0.78%, while the FTSEurofirst 300 index of Europe moved up 20.66 points, or 0.81%, and emerging markets equities climbed by 16.86 points, or 0.9%.

For developed countries, the dollar has been the clear winner this quarter, rising by 1.4% relative to its basket. However, for emerging economies, the dollar has lost 1.3% of its value relative to their currencies this quarter.

Record bullish positioning is being accumulated because of an amazing shift in the pricing of U.S. interest rates, which have gone from cutbacks to increases because of the robustness of the U.S. economy and inflationary pressure not just from energy prices but other sources as well. Traders are betting on at least one rate increase by the end of this year from the Fed.

Central bankers from around the globe have made their way to Sintra, Portugal, for the yearly meeting of the European Central Bank, and there is no one who will receive more attention than the newly appointed Fed chair, Kevin Warsh, who is due to give a speech at the conference on Wednesday. An increase in the dollar has led to a drop of 14% in gold over the quarter, which marks the biggest decline in gold price in over ten years, while the yen fell to its lowest level in 40 years at 162.38 yen per dollar on Tuesday.

The market was nervous about Japan’s potential to intervene since Finance Minister Satsuki Katayama gave another warning.

According to Karl Schamotta, chief market strategist at Corpay, “rather than escalating verbally as is customary before any purchase operation, Katayama made clear that the authorities would be ready to act at all times.”

However, “it may be noted that there might be some opportunities for taking advantage of wrong-footed short positions on Thursday with the release of the non-farm payroll data and on Friday during the Independence Day holiday,” stated Schamotta.

Brent crude futures, which expire on Tuesday, were unchanged today. The futures contract is set to record its third consecutive month of losses, having declined by around 20% in June and 38% over the past three months. The more active September contract remained unchanged. U.S. crude oil is expected to be down 30% over the quarter.

“I don’t think the market has priced the risk premium out at all, but stranded ships have been freed up with the number of ships leaving the Gulf, so there’s been an influx of ships on the market temporarily,” stated Giovanni Staunovo of UBS.

Morgan Stanley stated that it now expects to see an implied oversupply of 4.8 million barrels per day in 2027.