Stocks Climb on AI Optimism and Hopes for US Rate Cuts

Global stock markets reached fresh highs on Friday, bolstered by investor optimism over artificial intelligence (AI) and growing expectations of US interest rate cuts, which outweighed concerns regarding the ongoing government shutdown.

On Wall Street, indices were mixed at the close, although the Dow Jones Industrial Average and the S&P 500 both hit record levels.

"That's a stock market that continues to be pretty resilient to selling interest for any number of reasons, probably the most supportive of which is the expectation for multiple rate cuts before year-end," commented Patrick O'Hare of Briefing.com.

In Europe, London’s FTSE 100 reached an all-time high, driven by gains in banking and mining stocks. Paris’ CAC 40 also climbed, approaching its March peak, while Frankfurt’s DAX 40 slipped slightly but remained near record levels.

Tech stocks received another boost following a collaboration agreement between Japan’s Hitachi and OpenAI, developer of ChatGPT, focusing on AI and energy projects.

Shares in Nvidia, a US chip titan with a market value exceeding $4 trillion, pulled back slightly, despite the sector’s overall gains. Further momentum came from Samsung and SK hynix, which confirmed preliminary deals with OpenAI to supply chips and equipment for its Stargate project.

Positive sentiment was further supported by US labour market data indicating a slowdown, which has prompted the Federal Reserve to cut borrowing costs and signal further easing.

Despite the partial government shutdown, which has closed certain services and delayed key monthly employment figures, traders remained largely unfazed. Analysts suggest the shutdown is unlikely to prevent a second rate cut later this month.

"Markets seem to have taken this political impasse in their stride, showing little sign of stress," said Joshua Mahony, chief market analyst at Scope Markets.

"The lack of market reaction highlights how little investors believe the shutdown will matter for the medium-term outlook on growth or interest rates," he added.

However, US senators rejected a stopgap Republican funding measure on Friday, meaning the shutdown will continue into next week.

Key Market Figures (as of ~2020 GMT)

The market rally reflects strong investor appetite for AI-related stocks and continued confidence in the Federal Reserve’s monetary easing, despite political uncertainties in Washington.