Geopolitical tensions drive stock markets
Stock markets are being heavily influenced by the geopolitical tensions in the Middle East. Nevertheless, the MSCI World Index has not changed very dramatically. Since 28 February, the start of the military action, the index has fallen by 5.5%. Most of this decline occurred in the week immediately following initial events.
Some individual stocks have seen significant price movements. Oil companies and fertilizer producers in particular have posted strong gains. This is due to shortages, which have driven up prices and profit margins.
There was also company-specific news. Uber Technologies has expanded its partnership with Nvidia. Together, they aim to roll out a global network of self-driving taxis in 28 cities by 2028, using Nvidia’s software.
Boeing indicated that several issues will affect its first-quarter results. The company delivered fewer aircraft than planned, faced wiring problems with the 737 MAX and is incurring additional costs related to the reintegration of supplier Spirit AeroSystems.
Mastercard announced that it plans to acquire the startup BVNK, which develops technology for digital currencies. The acquisition could cost up to USD 1.8 billion. This comes four months after a potential deal between BVNK and Coinbase fell apart.
Unilever announced that it is in discussions with McCormick, which has made an offer for the company’s food division. Until Friday, Unilever’s share price had fallen by 5%, but on this news, the stock recovered part of that loss.
Shares of Tencent fell sharply after the company said it would buy back fewer of its own shares and did not present a clear plan for generating profits from artificial intelligence (AI) technology. Investors are concerned about earnings, especially after Tencent said it plans to double its AI investments to more than 36 billion yuan by 2026.
Swatch Group expects economic uncertainty to persist this year. Tensions in the Middle East are affecting the company, particularly because it operates more than 200 stores in the region. The Middle East accounted for 5 to 10% of revenue last year (excluding Saudi Arabia). Reduced tourism is expected to have a particularly negative impact toward the end of Ramadan. While Swatch expects strong sales, it warns that the strong Swiss franc will weigh on profits.
Finally, there was more news related to AI. Microsoft is considering legal action against Amazon and OpenAI over a USD 50 billion deal. Microsoft believes the deal may violate existing agreements regarding the use of its Azure cloud platform. Alibaba is raising prices for its AI services by up to 34%, Samsung is partnering with AMD on new AI memory technology and SAP is setting up a dedicated AI division and plans to adjust its pricing model, as AI is affecting its current subscription-based system.