Global equities closed at fresh records on 10 January after Tehran and Washington stepped back from further military action, freeing investors to chase growth bets from Silicon Valley to Shanghai. The MSCI All-Country World Index, which tracks 49 developed and emerging markets, finished the New York session at an all-time high, wiping out the sharp dip that followed Iran’s 8 January missile strike on U.S. bases in Iraq.
Futures had tumbled overnight as the Pentagon confirmed the launch, but sentiment flipped when President Trump announced expanded sanctions instead of a kinetic reprisal. By Friday’s close the index had added 0.7 percent for the week, its fifth consecutive gain.
Asia-Pacific shares outside Japan rose 0.18 percent, while Tokyo’s Nikkei 225 gained 0.43 percent and Sydney’s S&P/ASX 200 advanced 0.67 percent. European bourses joined the rally late Friday after the UK’s FTSE 100 and Germany’s DAX both added roughly half a percent. The S&P 500 climbed 0.67 percent to 3,274.70, a record close, with information technology shares up more than 1 percent.
Apple surged 2.12 percent to an all-time intraday peak after China’s ministry of commerce disclosed iPhone sales in the country jumped 18 percent in December. The Dow Jones Industrial Average rose 0.74 percent to 28,956.90, also a record.
Microsoft, Intel and chip equipment makers paced gains as traders rotated back into cyclical growth names that had lagged during the December air-strike scare. “When geopolitical risk premium evaporates this fast, momentum strategies kick in and amplify the move,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
“Given the current strength of the market, it is hard not to expect this rally to continue for the time being.” Brent crude fell back below $65 a barrel after touching $71 on the night of the missile launch, while West Texas Intermediate settled near $59. Gold slipped to $1,552.80 an ounce from a six-year high above $1,610, and the Japanese yen, traditionally a haven in Asia, gave up all of its overnight surge to trade at 109.30 per dollar.
The Cboe Volatility Index, Wall Street’s “fear gauge,” dropped below 13 after spiking above 17 earlier in the week. Currency desks noted that the Federal Reserve’s balance-sheet expansion, now running at $60 billion a month in T-bill purchases, is keeping dollar funding conditions easy and encouraging carry trades that feed back into higher stock prices.
Portfolio managers are now looking ahead to the 15 January White House ceremony where President Trump and China’s Vice Premier Liu He are scheduled to sign the phase-one trade agreement. Text released so far pledges Chinese purchases of an additional $200 billion in U.S. goods over two years and tighter intellectual-property safeguards, while Washington will halve 15 percent tariffs on $120 billion of Chinese products and cancel a threatened 25 percent levy on consumer electronics.
“The de-escalation in the Middle East clears the runway for investors to focus on earnings and the trade deal,” said Michael Purves, chief executive of Tallbacken Capital Advisors in New York. Futures markets price in a 61 percent chance the S&P 500 will post double-digit earnings growth in 2020, the fastest pace since 2018, according to Refinitiv data.
While markets cheered the pause in hostilities, Democratic lawmakers argued the administration’s maximum-pressure campaign has not produced a diplomatic breakthrough with Tehran. “The President’s impulsive decisions brought us to the brink of war,” Senator Elizabeth Warren said on the Senate floor Thursday. House Speaker Nancy Pelosi announced she will force a vote next week on a war-powers resolution intended to limit the White House’s ability to strike Iran without congressional approval.
Republican leaders dismissed the effort as symbolic, noting similar measures have failed to clear the Senate or survive veto threats. Investors largely shrugged off the partisan clash, although some strategists warn that any new escalation ahead of the November election could revive the risk premium that just evaporated. The swift rebound leaves global benchmarks within striking distance of round-number milestones, 3,300 for the S&P 500 and 30,000 for the Dow, ahead of the December-quarter earnings season that begins next week with JPMorgan and Wells Fargo.
Unless another geopolitical shock emerges, traders say liquidity-rich markets are positioned to grind higher as fund managers chase performance in a year that has already delivered outsized gains.
